<PAGE> 1
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
Commission File No. 0-24676
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(Exact name of registrant as specified in its charter.)
MICHIGAN 38-2505723
(State or other jurisdiction of (IRS Employer
incorporation or organization.) Identification No.)
1150 ELIJAH MC COY DRIVE, DETROIT, MICHIGAN
(Address of principal executive offices.)
Registrant's telephone number, including area code: (313) 871-8400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Common stock outstanding at November 10, 1997: 13,151,506 shares
The Exhibit Index is located on Page 15.
The total number of pages is 14.
<PAGE> 2
CARACO PHARMACEUTICAL LABORATORIES, LTD.
BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents.......................... $ 357,555
Accounts receivable, net of allowance of $30,000... 73,416
Inventories........................................ 488,894
Prepaid expenses and deposits...................... 253,084
----------
TOTAL CURRENT ASSETS................................. 1,172,949
----------
PROPERTY, PLANT AND EQUIPMENT - AT COST
Land............................................... 197,305
Building and improvements.......................... 6,682,725
Equipment.......................................... 3,569,995
Furniture and fixtures............................. 156,908
----------
Total.............................................. 10,606,933
Less accumulated depreciation...................... 2,614,625
----------
PROPERTY, PLANT AND EQUIPMENT, NET................... 7,992,308
----------
TOTAL ASSETS......................................... $9,165,257
==========
</TABLE>
See accompanying notes.
<PAGE> 3
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
CURRENT LIABILITIES
Accounts payable............................................ $ 1,257,054
Accrued expenses: 151,621
-----------
Total current liabilities................................. 1,408,675
Long-term demand notes (Note 3)............................. 2,040,000
Long-term mortgage note (Note 4)............................ 8,880,000
Accrued interest - long-term................................ 1,176,033
-----------
TOTAL LONG-TERM LIABILITIES................................... 12,096,033
-----------
TOTAL LIABILITIES............................................. 13,504,708
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock - no par value; authorized 5,000,000 shares;
issued and outstanding, 285,714 Series A shares............ 1,000,000
Common stock, no par value, authorized 20,000,000 shares;
13,151,506 shares issued and outstanding................... 27,296,974
Stock subscription receivable............................... (5,500,000)
Accumulated deficit......................................... (27,136,425)
-----------
TOTAL STOCKHOLDERS' DEFICIT................................... (4,339,451)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT................... $ 9,165,257
===========
</TABLE>
See accompanying notes.
<PAGE> 4
CARACO PHARMACEUTICAL LABORATORIES, LTD.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales........................ $ 158,394 $ 337,326 $ 586,812 $ 1,046,007
Cost of goods sold............... 371,780 420,802 1,020,903 1,331,441
----------- ----------- ----------- -----------
GROSS LOSS FROM SALES............ (213,386) (83,476) (534,091) (285,434)
Selling, general and
administrative expenses......... 309,176 460,565 1,159,113 1,539,684
Research and development costs... 307,142 608,807 1,028,756 1,480,502
----------- ----------- ----------- -----------
OPERATING LOSS................... (829,704) (1,152,848) (2,721,960) (3,305,620)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income................. 3,863 774 3,263 6,273
Interest expense................ (202,173) (169,907) (628,570) (498,675)
Other........................... 6,905 - (13,462) 1,023
----------- ----------- ----------- -----------
OTHER EXPENSE - NET.............. (191,405) (169,133) (638,169) (491,379)
----------- ----------- ----------- -----------
NET LOSS......................... $(1,021,109) $(1,321,981) $(3,360,129) $(3,796,999)
=========== =========== =========== ===========
Net loss per common share........ $ (0.10) $ (0.17) $ (0.39) $ (0.50)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding....... 10,119,732 7,900,856 8,604,106 7,536,731
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 5
CARACO PHARMACEUTICAL LABORATORIES, LTD.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------- ------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at December 31, 1995.................... 285,714 $1,000,000 6,855,807 $17,545,401
Issuance of common stock
(unaudited)................................... -- -- 986,299 2,101,573
Net loss (unaudited)............................ -- -- -- --
------- ---------- --------- -----------
Balance at September 30, 1996
(unaudited)................................... 285,714 $1,000,000 7,842,106 $19,646,974
------- ---------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------- ------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at December 31, 1996............................. 285,714 $1,000,000 7,842,106 $19,646,974
Preferred dividend (unaudited)........................... -- -- -- --
Receipt of common stock subscription
receivable (unaudited)................................. -- -- -- --
Issuance of common stock (unaudited)..................... -- -- 5,309,400 7,650,000
Net loss (unaudited)..................................... -- -- -- --
------- ---------- ---------- -----------
Balance at September 30, 1997 (unaudited)................ 285,714 $1,000,000 13,151,506 $27,296,974
======== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED LOSS ON
SUBSCRIPTION MARKETABLE
RECEIVABLE DEFICIT SECURITIES TOTAL
---------- ------- ---------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1995........ $(14,087) $(18,232,364) $(160,924) $ 138,026
Issuance of common stock
(unaudited)....................... -- -- -- 2,101,573
Net loss (unaudited)................ -- (3,796,999) -- (3,796,999)
-------- ------------ --------- -----------
Balance at September 30, 1996
(unaudited)....................... $(14,087) $(22,029,363) $(160,924) $(1,557,400)
======== ============ ========= ===========
</TABLE>
<TABLE>
<CAPTION>
SUBSCRIPTION ACCUMULATED
RECEIVABLE DEFICIT TOTAL
---------- ------- -----
<S> <C> <C> <C>
Balance at December 31, 1996........................ $ (14,087) $(23,731,296) $(3,098,409)
Preferred dividend (unaudited)...................... -- (45,000) (45,000)
Receipt of common stock subscription
receivable (unaudited)............................. 14,087 -- 14,087
Issuance of common stock (unaudited)................ (5,500,000) -- 2,150,000
Net loss (unaudited)................................ -- (3,360,129) (3,360,129)
----------- ------------ -----------
Balance at September 30, 1997 (unaudited)........... $(5,500,000) $(27,136,425) $(4,339,451)
=========== ============ ===========
</TABLE>
See accompanying notes.
<PAGE> 6
CARACO PHARMACEUTICAL LABORATORIES, LTD.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $(3,360,129) $(3,796,999)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation........................................... 365,850 384,300
Changes in operating assets and liabilities
which provided (used) cash:
Accounts receivable.................................. 23,925 361,165
Inventories.......................................... (198,629) 42,637
Prepaid expenses and deposits........................ (49,467) 16,820
Accounts payable..................................... (304,706) 442,235
Accrued expenses..................................... 587,179 187,650
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES..................... (2,935,977) (2,362,192)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment............... (7,976) (64,539)
Proceeds from sale of marketable securities.............. 82,000 -
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES....... 74,024 (64,539)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock................... 2,119,087 2,101,573
Repayments of long-term debt............................. - (120,000)
Net short-term borrowings................................ 1,085,000 300,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................. 3,204,087 2,281,573
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS..................................... 342,134 (145,158)
Cash and cash equivalents, beginning of period............ 15,421 332,264
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................. $ 357,555 $ 187,106
=========== ===========
Supplemental disclosures of cash flows information:
Cash paid for interest.................................... $ 451 $ 164,966
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 7
CARACO PHARMACEUTICAL LABORATORIES, LTD.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
1. BASIS OF PRESENTATION
The balance sheet as of September 30, 1997 and the related statements of
operations, stockholders deficit and cash flows for the three and nine
months ended September 30, 1997 and 1996 are unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only
of normal recurring items. Interim results are not necessarily
indicative of results for the full year.
The financial statements as of September 30, 1997 and for the three and
nine months ended September 30, 1997 and 1996 should be read in
conjunction with the financial statements and notes thereto included in
the Corporation's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
The accounting policies followed by the Corporation with respect to the
unaudited interim financial statements are consistent with those stated
in the 1996 Caraco Pharmaceutical Laboratories, Ltd. Annual Report on
Form 10-KSB.
The accompanying financial statements have been prepared assuming that
the Corporation will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business.
The Corporation has not currently achieved sales necessary to support
operations. The Corporation has, as of September 30, 1997, stockholders'
deficit of $4,339,451 and working capital deficit of $235,726.
Realization of a major portion of the assets is dependent upon the
Corporation's ability to meet its future financing requirements and the
success of future operations, the outcome of which cannot be determined
at this time.
In August 1997, the Corporation and an Indian specialty pharmaceutical
company, Sun Pharmaceutical Industries Ltd. ("Sun Pharma") completed an
agreement whereby (a) in exchange for 5,300,000 shares of Caraco common
stock Sun Pharma will invest $7,500,000 to be received by the Corporation
over a period of approximately two years in four installments, (b) the
number of products to be sold to the Corporation by Sun Pharma is 25
over a period of five years in exchange for 544,000 shares of Caraco
common stock to be issued for each product, (c) two current Caraco
shareholder directors will each contribute to the Corporation the
equivalent of up to $500,000 in cash or in shares of Caraco common stock,
not to exceed 250,000 shares each, and (d) Sun Pharma will appoint four
members to the Caraco Board of Directors, bringing the total membership
to nine.
On August 23, 1997 the Corporation issued 1,413,333 shares of common
stock to Sun Pharma upon the receipt of $2,000,000 in cash which
represents the first of the four installments described above.
<PAGE> 8
CARACO PHARMACEUTICAL LABORATORIES, LTD.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
2. LOSS FROM DEFALCATION
During the year ended December 31, 1994, the Corporation determined that
approximately $514,000 of Corporation funds had been misappropriated by
the Corporation's former controller and his brother, both sons of the
Corporation's former Chairman Emeritus. The misappropriations occurred
during the period from January through June of 1994. The Corporation's
former Chairman Emeritus reimbursed the Corporation the $514,000. In
connection with this matter, approximately $56,000 in certain legal and
other expenses incurred by the Corporation in conducting an investigation
into this matter were paid directly by the former Chairman Emeritus from
his personal funds.
The Corporation has made filings concerning this matter with the
Securities and Exchange Commission (SEC). On November 1, 1996, the
Corporation, through its legal counsel, was notified by the SEC that its
Enforcement Division has tentatively decided not to recommend that the
Commission authorize an enforcement action against the Corporation. The
SEC further advised that it nevertheless was possible that an action
against the Corporation may ultimately result from the investigation.
The SEC's investigation had revealed that the defalcation which was
reported October 18, 1994 had also occurred in 1993, as well as in the
first half of 1994, and that the 1993 defalcation had totaled at least an
additional $300,000. On September 4, 1997, the SEC instituted a civil
complaint proceeding against the Corporation's former controller and his
brother, neither of whom have been associated with the Corporation since
June of 1994.
3. SHORT-TERM DEMAND NOTES
On September 15, 1997, short-term demand notes of $2,040,000 were
restructured. The Agreement provides for the principal to be due August
1, 1999 in cash or an equivalent number of common shares at $1.50 per
share at the lender's discretion. Interest at 10% is to be prepaid in
exchange for an equivalent number of shares of common stock of the
Corporation at $1.50 per share. This agreement was approved by the Board
of Directors on October 7, 1997.
4. LONG-TERM MORTGAGE NOTE
On August 5, 1997, the Corporation entered into an agreement with the
Economic Development Corporation of Dectriot (EDC) to modify certain
terms and conditions related to the $8,880,000 debt. In general, the
agreement provides for the deferral of scheduled principal and interest
payments until February 1999, at which time such payments will commence
in accordance with the terms of the agreement. In turn the EDC obtains
additional collateral as security for the debt.
<PAGE> 9
CARACO PHARMACEUTICAL LABORATORIES, LTD.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Sales
Net sales for the periods ended September 30, 1997 and 1996 were
$158,394 and $337,326, respectively. The decrease of 53% in sales is
directly attributable to the current generic pharmaceutical market
conditions, which forced the Corporation to lower the price of its
products to remain competitive. It is anticipated that the current
depressed level of sales will continue for the near future due to the
Corporation's limited product base, loss of customers due to the
inability to continually supply product, and the period required to
implement the Corporation's new marketing plan.
The Corporation anticipates increased sales volume from three (3) ANDAs
currently in various stages of the FDA approval process. The first two
of these ANDAs, Metoprolol Tartrate and Paromomycin Sulfate, which were
approved in December 1996 and June 1997, respectively, are expected to
contribute sales in the fourth quarter of 1997. The Corporation
continues to pursue logical extensions of its current product line as
well as search for strategic alternatives to improve its financial
condition and top line growth.
Cost of Sales
Cost of sales for the periods ended September 30, 1997 and 1996 were
$371,780 or 235% of sales and $420,802 or 125% of sales, respectively.
The increased percentage in cost of sales in 1997 was a result of the
Corporation's inability to purchase raw materials and bulk product from
its suppliers at favorable economic quantity and price. Due to
inadequate capital funds, the Corporation was unable to maintain
adequate levels of production and as a result, was not able to absorb
the Corporation's fixed production costs, and meet customers supply
requirements.
General and Administrative
Selling, general and administrative expenses for the periods ended
September 30, 1997 and 1996 were $390,176 and $460,565, respectively.
The decrease of 15% is primarily related to the Corporation's ongoing
cost containment program implemented in 1995 in response to the
Corporation's losses and industry trends.
The Corporation continues to implement measures to further reduce costs
and improve operating efficiencies. In addition, a salary reduction of
25% of certain officers was implemented January 1, 1997 and there has
been a 30% reduction in the number of the Corporation's employees.
<PAGE> 10
CARACO PHARMACEUTICAL LABORATORIES, LTD.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Research and Development
Product development expenses for the periods ended September 30, 1997
and 1996 were $307,142 and $608,807, respectively, demonstrating
Caraco's continued commitment to new product development as a means to
increase and diversify its product offering despite the Corporation's
current financial condition. As resources allow, the Corporation plans
to rapidly expand product development activities as its believes such
efforts are vital to expanding the Corporation's product line and
generating future products. In December 1996 and June 1997, the
Corporation was notified of ANDA approvals on Metoprolol Tartrate and
Paromomycin Sulfate. These products have completed product validation
and are presently being marketed by the Company. While there can be no
guarantee, the Corporation anticipates FDA approval for two additional
ANDAs in 1998.
Results of Operations
Operating losses for the nine month periods ended September 30, 1997
and 1996 were $829,704 and $1,152,848, respectively. The operating
losses are directly related to net sales which were inadequate to
absorb the fixed costs of the Corporation's operational expenses. A
number of uncertainties exist that may influence the Corporation's
future operating results. These uncertainties include general economic
conditions, changes in conditions affecting the pharmaceutical industry
primarily related to intensified generic drug competition, the
Corporation's success in developing and marketing new products,
manufacturing performance, availability and price fluctuations of raw
materials, FDA regulations and other factors. These competitive
pressures as well as costs required to comply with FDA and CGMP
requirements will effect the Corporation's ability to reach
profitability.
There is no assurance that any of the Corporation's ANDAs on file will
be approved by the FDA within time parameters anticipated by management
or at all, or that the Corporation will be able to manufacture in
commercial quantities and sell profitably any product resulting from
FDA approval of an ANDA filed by the Corporation.
Interest Expense
Interest expense, which is incurred primarily in connection with the
Corporation's mortgage obligation to the Economic Development
Corporation of Detroit, was $202,173 and $169,907 for the periods ended
September 30, 1997 and 1996, respectively. The increase in interest
expense relates to an increase in short-term loans from three (3)
shareholder directors and Sun Pharma Global used to finance the
Corporation's short-term cash requirements during negotiations with
the Economic Development Corporation of Detroit and Sun Pharma which
were finalized in August 1997.
<PAGE> 11
CARACO PHARMACEUTICAL LABORATORIES, LTD.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources
At September 30, 1997, the Corporation's working capital deficit was
$235,726. The deficit in working capital is directly attributed to the
Corporation's continued losses from operations.
Management estimates that, at its currently planned and anticipated
level of operations, the Corporation will experience continued
operating losses for the remainder of 1997, and accordingly, will
require significant additional funds to execute its business expansion
plan and fund continuing operations on a going forward basis.
The Corporation has no material commitments for capital expenditures.
In August 1997, the Corporation and an Indian specialty company, Sun
Pharmaceutical Industries, Ltd. ("Sun Pharma") completed an agreement
whereby (a) Sun Pharma will invest $7,500,000 to be received by the
Corporation over a period of approximately two years in four
installments, (b) the number of products to be sold to the
Corporation by Sun Pharma is 25 over a period of five years in exchange
for 544,000 shares of Caraco common stock to be issued for each
product, (c) two current Caraco shareholder directors will each
contribute to the Corporation up to $500,000 in cash or common stock of
Caraco, not to exceed 250,000 shares each, and (d) Sun Pharma will
appoint four members of the Caraco Board of Directors.
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
At a meeting on October 7, 1997 the Board of Directors unanimously
adopted resolutions reorganizing and reconstituting the Board of Directors and
membership in the standing committees of the Board of Directors as follows:
The following were elected to the Board of Directors:
Shantilal Shanghvi to serve until the year 2000
Dilip Shanghvi to serve until the year 2000
Sudhir Valia to serve until the year 1998
Narendra Borkar to serve until the year 1998
Mr. Dilip Shanghvi was elected as Chairman of the Board.
<TABLE>
<CAPTION>
Name of Committee Members Appointed
----------------- -----------------
<S> <C>
Executive Committee Dilip Shanghvi
Narendra Borkar
Sudhir Valia
Jay Joliat
David Adamany
Finance Committee Shantilal Shanghvi
David Hagelstein
Sudhir Valia
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
Audit Committee Shantilal Shanghvi
Phyllis Harrison-Ross
David Adamany
Sudhir Valia
Compensation Committee Dilip Shanghvi
Sudhir Valia
John Morris
</TABLE>
ITEM 6. EXHIBITS AND REPORTS
a. The following exhibits are filed as part of this report and are
attached hereto:
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
10.60 Stock Purchase Agreement by and
between Caraco Pharmaceutical
Laboratories, Ltd. and Sun
Pharmaceutical Industries, Ltd.
dated as April 23, 1997
10.61 Products Agreement by and between
Caraco Pharmaceutical
Laboratories, Ltd. and Sun
Pharmaceutical Industries, Ltd.
dated as April 23, 1997
10.62 Registration Rights Agreement
dated as April 1997
10.63 Stock Pledge Agreement dated
as July 28, 1997
10.64 Contribution Agreement dated as
of March 27, 1997
10.65 Addendum to Contribution Agreement
dated as of July 27, 1997
27 Financial Data Schedule
</TABLE>
b. There were two Form 8-K's filed during the third quarter of 1997:
August 21, 1997
October 8, 1997
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARACO PHARMACEUTICAL LABORATORIES, LTD.
By: /s/ Allan J. Hammer
-------------------------------------------------
Allan J. Hammer
Chief Financial Officer (Principal
Accounting Officer and a duly
authorized signatory of the Company)
DATED: August 13, 1997
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT TABLE
NUMBER EXHIBIT PAGE
- -----------------------------------------------------------
<S> <C> <C>
10.60 Stock Purchase Agreement by and
between Caraco Pharmaceutical
Laboratories, Ltd. and Sun
Pharmaceutical Industries, Ltd.
dated as April 23, 1997
10.61 Products Agreement by and between
Caraco Pharmaceutical
Laboratories, Ltd. and Sun
Pharmaceutical Industries, Ltd.
dated as April 23, 1997
10.62 Registration Rights Agreement
dated as April 1997
10.63 Stock Pledge Agreement dated
as July 28, 1997
10.64 Contribution Agreement dated as
of March 27, 1997
10.65 Addendum to Contribution Agreement
dated as of July 27, 1997
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.60
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CARACO PHARMACEUTICAL LABORATORIES, LTD.
and
SUN PHARMACEUTICAL INDUSTRIES, LTD.
dated as of
April 23, 1997
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS
2. PURCHASE AND SALE OF SHARES
2.1 TRANSACTION
2.2 PURCHASE PRICE
2.3 CLOSING
2.4 DELIVERIES AT THE CLOSING
3. REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 ORGANIZATION OF BUYER
3.2 AUTHORIZATION OF TRANSACTION
3.3 NONCONTRAVENTION
3.5 INVESTMENT
4. REPRESENTATIONS AND WARRANTIES CONCERNING SELLER
4.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER
4.2 CAPITALIZATION
4.3 AUTHORIZATION; NONCONTRAVENTION
4.4 BROKERS' FEES
4.5 SEC FILINGS; FINANCIAL STATEMENTS
4.6 NO OTHER AGREEMENTS TO SELL
4.7 PRODUCTS AND PRODUCT REGULATION
4.8 ABSENCE OF UNDISCLOSED LIABILITIES
4.9 ABSENCE OF CERTAIN DEVELOPMENTS
<PAGE> 3
4.10 BOOKS AND RECORDS
4.11 LEGAL COMPLIANCE
4.12 TAX MATTERS
4.13 TITLE TO PROPERTIES; ENCUMBRANCES
4.14 FACILITY SITE
4.15 ENVIRONMENTAL LAWS AND REGULATIONS
4.16 INTELLECTUAL PROPERTY
4.17 CONTRACTS
4.18 LITIGATION; PROCEEDINGS
4.19 EMPLOYEE BENEFITS
4.21 EMPLOYEES
4.22 PRODUCT LIABILITY
4.23 INSURANCE
4.24 AFFILIATE TRANSACTIONS
4.25 NOT A BUSINESS COMBINATION; SHARES ACQUIRED NOT CONTROL SHARES
4.26 REGISTRATION RIGHTS
4.27 GENERAL
5. PRE-CLOSING COVENANTS
5.1 GENERAL
5.2 NOTICES AND CONSENTS
5.3 FULL ACCESS
5.4 ADDITIONAL FINANCIAL STATEMENTS AND OTHER INFORMATION
5.5 HEXAL OPTIONS
5.6 AMENDMENT TO ARTICLES OF INCORPORATION
5.7 OTHER AFFIRMATIVE COVENANTS OF THE SELLER
5.8 NEGATIVE COVENANTS OF THE SELLER
<PAGE> 4
5.9 ADDITIONAL COVENANT OF BUYER
6. CONDITIONS TO OBLIGATION TO CLOSE
6.1 CONDITIONS TO OBLIGATION OF BUYER
6.2 CONDITIONS TO OBLIGATION OF THE SELLER
7. STOCK EXCHANGE LISTING
7.1 BEST EFFORTS TO RELIST ON NASDAQ
7.2 LISTING OF COMMON PURCHASED HEREUNDER
8. REMEDIES FOR BREACHES OF THIS AGREEMENT
8.1 SURVIVAL
8.2 INDEMNIFICATION
8.3 PLEDGE AGREEMENT PROVIDES SOLE REMEDY
8.4 ARBITRATION
8.5 FINDER'S OR BROKER'S FEES
9. TERMINATION
9.1 TERMINATION OF AGREEMENT
9.2 EFFECT OF TERMINATION
10. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS
11. NO THIRD-PARTY BENEFICIARIES
12. FURTHER ASSURANCES
13. ENTIRE AGREEMENT
14. BINDING EFFECT; ASSIGNMENT
<PAGE> 5
15. COUNTERPARTS
16. HEADINGS
17. NOTICES
18. GOVERNING LAW
19. AMENDMENTS AND WAIVERS
20. SEVERABILITY
21. EXPENSES
22. CONSTRUCTION
23. INCORPORATION OF EXHIBITS, ANNEXES AND SCHEDULES
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT, made this 1st day of April, 1997, by and between CARACO
PHARMACEUTICAL LABORATORIES, LTD., a Michigan corporation ("Seller"), and SUN
PHARMACEUTICAL INDUSTRIES, LTD., a corporation organized under the laws of India
("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the manufacture and distribution of generic
pharmaceuticals; and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to issue
and sell to Buyer, 5,300,000 shares of Seller's Common Stock, with no par value
per share (with any stock into which such stock may hereinafter be changed,
"Common"), under the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows.
1. DEFINITIONS.
1.1 "Acceptable Letter of Credit" shall mean an irrevocable letter of
credit, expiring not less than six months after the date of issuance, issued by
a bank reasonably selected by Buyer and substantially in the form attached
hereto as EXHIBIT 1.1, which letter of credit provides that Seller may make
draws upon such letter of credit (i) automatically upon the expiration of such
letter of credit or (ii) by presenting evidence of a duly adopted resolution of
the Executive Committee of Seller's Board of Directors authorizing that such
draw be made certified by Seller's Chief Executive Officer.
1.2 "Affiliate" of any particular Person shall mean any other Person
controlling, controlled by or under common control with such
Person.
1.3 "Acquired Shares" has the meaning set forth in Section 2.1
below.
1.4 "Business Sale" has the meaning set forth in Section 5.8.2
below.
1.5 "By-law Amendment" has the meaning set forth in Section 6.1.12
below.
1.6 "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Sections 9601-9675.
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1.7 "Closing" has the meaning set forth in Section 2.3 below.
1.8 "Closing Date" has the meaning set forth in Section 2.3 below.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
1.10 "Common" has the meaning set forth in the recitals hereto.
1.11 "Contribution Agreement" has the meaning set forth in Section
6.1.13 hereof.
1.12 "Controlled Group" has the meaning set forth in Section 4.19.5
below.
1.13 "Employee Pension Plans" has the meaning set forth in Section
4.19.1 below.
1.14 "Employee Welfare Plans" has the meaning set forth in Section
4.19.1 below.
1.15 "Environmental and Safety Requirements" has the meaning set
forth in Section 4.15 below.
1.16 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.17 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.18 "FDA" has the meaning set forth in Section 4.7.2 below.
1.19 "GAAP" means generally accepted accounting principles of the
United States as in effect from time to time.
1.20 "Government Licenses" means all permits, licenses, franchises,
orders, registrations, certificates, variances, approvals and other
authorizations obtained from foreign, federal, state or local
governments or governmental agencies or other similar rights,
including those listed on Exhibit 4.20.
1.21 "Hagelstein" means David A. Hagelstein, individually, and as
Trustee of the David Hagelstein Trust u/a/d October 27, 1993.
1.22 "Hazardous Material" has the meaning set forth in Section 4.15
below.
1.23 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
1.24 "Indemnified Parties" has the meaning set forth in Section 7.2
below.
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1.25 "Information Statement" has the meaning set forth in Section 5.5
below.
1.26 "Initial Payment" has the meaning set forth in Section 2.2.1 below.
1.27 "Joliat" means Jay F. Joliat, individually, and as Trustee of
the Jay F. Joliat Qualified Terminable Interest Marital Trust
u/a/d April 8, 1982.
1.28 "Joliat and Hagelstein Performance Date" means the date on which
Joliat and Hagelstein have made aggregate contributions to Seller
in an aggregate amount of not less than $1,000,000 in accordance
with the terms of the Contribution Agreement.
1.29 "Latest Balance Sheet" means the unaudited balance sheet as of
December 31, 1996 which is included in the Seller's Year End Report
on Form 10-KSB filed with the Securities and Exchange Commission on
March 31, 1997.
1.30 "Liens" means any mortgage, pledge, lien, encumbrance, security
interest, conditional sale agreement, easement, option, debt,
charge, claim or restriction of any kind.
1.31 "Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
1.32 "Ordinary Course of Business" means the ordinary course of
business for the Seller, consistent with past custom and practice.
1.33 "Other Plans" has the meaning set forth in Section 4.19.1 below.
1.34 "Permitted Liens" means (a) mechanic's, materialmen's and similar
liens; (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate
proceedings and as to which adequate reserves have been established
in accordance with GAAP; (c) other Liens arising in the Ordinary
Course of Business by operation of statute or law and securing
obligations of the Seller which are not yet due and payable; and
(d) the Liens listed on Exhibit 1.35 hereto.
1.35 "Person" means any individual, sole proprietorship, partnership,
joint venture, limited liability company, trust, unincorporated
association, corporation, entity or governmental entity (whether
federal, state, county, city or otherwise and including any
instrumentality, division, agency or department thereof).
1.36 "Plans" has the meaning set forth in Section 4.19.1 below.
1.37 "Pledge Agreement" has the meaning set forth in Section 6.2.6
below.
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1.38 "Product" means a "drug" as defined in 21 U.S.C. 321(g), or a
"device" as defined in 21 U.S.C. 321(h).
1.39 "Products Agreement" has the meaning set forth in Section 6.1.10
below.
1.40 "Proprietary Rights" means all of the following owned by, issued
to, or licensed to Seller, or used in its business, along with all
associated income, royalties, damages and payments due from or
payable by any third party (including damages and payments for
past, present, or future infringements or misappropriations
thereof), all other associated rights (including the right to sue
and recover for past, present, or future infringements or
misappropriations thereof), and any and all corresponding rights
that, now or hereafter, may be secured throughout the world: (i)
patents, patent applications, patent disclosures and inventions
(whether or not patentable and whether or not reduced to practice),
and any reissues, continuations, continua tions-in-part, divisions,
extensions or reexaminations thereof; (ii) trademarks, service
marks, trade dress, logos, slogans, trade names and corporate
names, together with all goodwill associated therewith, and all
registrations and applications for registration thereof; (iii)
copyrights and works of authorship, and all registrations and
applications for registration thereof; (iv) mask works and all
registrations and applications for registration thereof; (v)
computer software (including data, data bases and related
documentation); (vi) trade secrets, confidential information, and
proprietary data and information (including compilations of data
(whether or not copyrighted or can copyright), ideas, formulae,
compositions, blends, processes, know-how, manufacturing and
production processes and techniques, research and development
information, drawings, specifications, designs, plans,
improvements, proposals, technical data, financial and accounting
data, business and marketing plans, and customer and supplier lists
and related information); (vii) other intellectual property rights
or proprietary rights; and (viii) all copies and tangible
embodiments of the foregoing (in whatever form or medium),
including, in the case of each of the foregoing items (i) through
(vii), the items set forth on Exhibit 4.16.
1.41 "Purchase Price" has the meaning set forth in Section 2.2 below.
1.42 "SEC" means the United States Securities and Exchange Commission,
or any successor governmental entity.
1.43 "Securities Act" means the Securities Act of 1933, as amended.
1.44 "SEC Reports" means all forms, reports, statements and documents
required to be filed by the Seller with the SEC since February 11,
1994.
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1.45 "Tax" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, real property gains, registration,
value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, customs, duties, real
property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever, including any
interest, penalties or additions to tax or additional amounts in
respect of the foregoing.
1.46 "Tax Return" means any return, declaration, report, claim for
refund, information return or other document (including any related
or supporting schedule, statement or information) filed or required
to be filed in connection with the determination, assessment or
collection of any Tax of any party or the administration of any
laws, regulations or administrative requirements relating to any
Tax.
1.47 "Voting Agreement" has the meaning set forth in Section 6.1.11
hereof.
2. PURCHASE AND SALE OF SHARES.
2.1 Transaction. Under and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from Seller, and Seller agrees to issue and
sell to Buyer, 5,300,000 shares of Common (the "Acquired Shares") for the
consideration specified below in this Section 2.
2.2 Purchase Price. The purchase price for the purchase of the
Acquired Shares shall be US$7,500,000 (the "Purchase Price"), which shall be
paid to the Seller by Buyer as follows:
2.2.1 Anytime before the Closing, but after the receipt of final approval
of Reserve Bank of India and/or Government (or any agency or department) of
the Republic of India, by the Buyer, for remittance of funds in accordance
with the terms hereof and the Products Agreement, Buyer shall deliver to
Seller a certified or official Bank Check or wire transfer in the amount of
$500,000 payable to the order of Seller ("Advance towards Share Application
Money"). This amount shall be treated as interest bearing loan from the
Buyer to the Seller till the time of the Closing and shall be secured by a
charge on all the existing equipment and movable and immovable properties
of the Seller, subject to prior charges of 1) Economic Development
Corporation 2) Trustees of J. Joliat Trust 3) Trustee of David Hagelstein
Trust and 4) Sun Pharma Global, Inc. for this purpose the Seller will enter
into a Security Agreement, a secured Promissory Note and such other
documents as the Buyer may reasonably require.
If for any reason whatsoever, this agreement is terminated or not acted
upon by the parties or the Closing does not come through, this amount or
$500,000 shall be refunded immediately by the Seller to the Buyer.
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However, if the Closing comes through, this amount shall be adjusted
towards the Buyer's payment of purchase price for the shares.
2.2.2 At the Closing, Buyer shall deliver to Seller a certified or
official bank check or wire transfer in the amount of $1,500,000 payable to
the order of Seller (the "Initial Payment").
2.2.3 On or before September 30, 1997, Buyer shall deliver to Seller one
or more Acceptable Letters of Credit, which, in the aggregate, have an
initial principal amount of $2,000,000.
2.2.4 Within 180 days after the Joliat and Hagelstein Performance Date,
Buyer shall deliver to Seller one or more Acceptable Letters of Credit
which, in the aggregate, have an initial principal amount of $2,000,000.
2.2.5 Within 360 days after the Joliat and Hagelstein Performance Date,
Buyer shall deliver to Seller one or more Acceptable Letters of Credit
which, in the aggregate, have an initial principal amount of $1,500,000.
2.2.6 In lieu of all or any portion of any payment which may be made by
delivery of an Acceptable Letter of Credit, Buyer may, in its sole
discretion, deliver a certified or bank check or wire transfer in an amount
equal to the portion of the principal grant of the Acceptable Letter of
Credit which it has determined to pay in cash.
2.3 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Sun
Pharmaceutical to occur of (a) April 30, 1997 or (b) a date designated by
Buyer on a business day within fifteen (15) business days following the
date as of which the conditions to each party's obligations (as set forth
in Section 6 hereof) have been satisfied, or at such other date as Buyer
and Seller may mutually determine (the "Closing Date").
2.4 Deliveries at the Closing. At the Closing: (a) the Seller will
deliver to Buyer the various certificates, instruments and documents
referred to in Section 6.1 below; (b) Buyer will deliver to Seller the
various certificates, instruments and documents referred to in Section 6.2
below; (c) Seller will deliver to Buyer (i) three stock certificates with
each such certificate representing 1,413,333 shares of Common each being
dated the Closing Date and (ii) one stock certificate representing
1,060,001 shares of Common dated the Closing Date, all such stock
certificates to be duly executed, authorized and delivered by Seller; and
(d) Buyer will deliver to the Seller the Initial Payment as specified in
Section 2.2.1 above.
3. REPRESENTATIONS AND WARRANTIES OF BUYER.
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Buyer represents and warrants to Seller as follows:
3.1 Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of India.
3.2 Authorization of Transaction. Buyer has full corporate power and
authority to execute and deliver this Agreement and the other agreements
contemplated hereby to which Buyer is a party and to perform its
obligations hereunder and thereunder. The execution and delivery by Buyer
of this Agreement and the other agreements contemplated hereby to which
Buyer is a party and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all requisite
corporate action, and no other corporate act or proceeding on the part of
Buyer, its board of directors or stockholders is necessary to authorize the
execution or delivery of this Agreement or the other agreements
contemplated hereby to which Buyer is a party. This Agreement has been
duly executed and delivered by Buyer and constitutes, and the other
agreements contemplated hereby to which Buyer is a party upon execution and
delivery by Buyer will each constitute, the valid and legally binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms and conditions.
3.3 Noncontravention. Other than the consents and approvals of or
filings or registrations with the Reserve Bank of India and/or the
government of the Republic of India (or any agency thereof), neither the
execution and the delivery of this Agreement and the other agreements
contemplated hereby to which Buyer is a party, nor the consummation of the
transactions contemplated hereby and thereby, will: (a) violate, (b)
conflict with, (c) result in a breach of, (d) constitute a default under,
(e) result in the termination or acceleration of or create in any party the
right to accelerate, terminate, modify or cancel, or (f) require any
authorization, consent, approval, exemption or other action by or notice to
any Person under, Buyer's charter or bylaws, or any agreement, contract,
lease, loan agreement, indenture, license, permit, mortgage or other
instrument to which Buyer is a party or by which Buyer is bound or to which
any of its assets is subject or any statute, regulation, rule, injunction,
judgment, order or decree of any governmental agency or court to which
Buyer is subject, in any such case in any manner which would materially
and adversely affect the ability of buyer to perform its obligation under
this Agreement or any of the other Agreement contemplated hereunder.
3.4 Investment. Buyer: (a) understands that the Acquired Shares have
not been, and may never be (subject to Company's obligations under the
Registration Rights Agreement) registered under the Securities Act, or
under any state securities laws, and are being offered and sold in reliance
upon exemptions from the registration requirements of the Securities Act
and such state securities laws for transactions not involving any public
offering; (b) is acquiring the Acquired Shares solely for its own account
for investment purposes, and not with a view to, or for resale in
connection with, the
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distribution thereof; (c) is a sophisticated investor with such knowledge
and experience in business and financial matters that Buyer is capable of
evaluating the merits and risks of the investment hereunder; (d) has
received and relied upon certain information concerning Seller and has had
access to and the opportunity to review additional information (and to the
extent reviewed, has relied upon such information) including, without
limitation, books and records of Seller and material contracts and
documents relating to this transaction and has had the opportunity to
question the appropriate executive officers of Seller, all as desired in
order to evaluate the merits and risks inherent in holding the Acquired
Shares (provided that nothing in this clause (d) shall affect or limit in
any manner the representations, warranties, covenants or agreements of
Seller contained in this Agreement); and (e) is able to bear the economic
risk and lack of liquidity inherent in holding the Acquired Shares.
4. REPRESENTATIONS AND WARRANTIES CONCERNING SELLER.
Seller represents and warrants to Buyer, as follows:
4.1 Organization, Qualification and Corporate Power. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Michigan. Seller is duly authorized to conduct
business under the laws of Michigan, which constitutes the only
jurisdiction in which the ownership of properties or the conduct of
business requires Seller to be so qualified and the failure to so qualify
could reasonably be expected to have an adverse effect on Seller or its
condition (financial or otherwise), earnings, assets, liabilities, business
operations or prospects or the transactions contemplated hereby. Seller has
full corporate power and authority and all licenses, permits and
authorizations necessary to carry on the business in which it is engaged
and will be engaged in immediately after the transactions contemplated by
this Agreement and to own and operate the properties owned and operated by
it. The copies of the Articles of Incorporation, attached hereto as
EXHIBIT 4.1(a), and Bylaws, attached hereto as EXHIBIT 4.1(b), of Seller
are, and will be, accurate and complete as of the date hereof (except to
the extent the By-laws have been amended by the By-law Amendment) and the
Closing Date. Seller does not have any subsidiaries and does not own any
stock, partnership interests, joint venture interests, membership interests
or any other security issued by any other Person.
4.2 Capitalization. As of the date of this Agreement, the authorized
capital stock of Seller consists of 20,000,000 shares of Common, 7,842,106
of which are currently issued and outstanding, and 5,000,000 Preferred
shares, 285,714 of which have been designated as Series A Preferred Stock
and are currently issued and outstanding. Other than the 285,714 shares of
Series A Preferred Stock, no other Preferred Shares have been designated or
issued or are outstanding. All of the outstanding shares of the Common and
Series A Preferred Stock have been duly and validly authorized and issued,
are fully
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paid and non-assessable and were issued in compliance with all applicable
federal and state securities law registration requirements (including,
without limitation, any requirements pursuant to Section 5 of the
Securities Act), or pursuant to valid exemptions therefrom. Other than
this Agreement and the Products Agreement and as listed on EXHIBIT 4.2,
there are no subscriptions, options, warrants, calls, commitment,
preemptive rights or other rights of any kind outstanding for the purchase
of, nor any securities convertible into or exchangeable for, any
securities. EXHIBIT 4.2 contains a true and correct list of all persons
holding options and/or warrants ("Stock Options") to purchase shares of
Common Stock, the number of Stock Options held by such person and the
exercise price with respect to such Stock Options. The execution,
delivery, and performance of this Agreement and the Products Agreement will
not result in any change in the exercise price or the number of shares
issuable upon the exercise of any of the Stock Options. There are no
restrictions upon the voting or transfer of any shares of the Common
pursuant to the Company's Articles of Incorporation, Bylaws or other
governing documents or any agreement or other instrument to which the
Seller is a party or by which the Seller is bound. Except for the Voting
Agreement, there are no voting trusts, proxies or any other agreements or
understandings with respect to the voting of the capital stock of Seller to
which the Company is a party or of which it knows, should reasonably know
or has received notice. Upon consummation of the transactions contemplated
by this Agreement, the Acquired Shares will be duly authorized and validly
issued and not subject to any preemptive or similar rights, and (i) upon
receipt of the Initial Payment, 1,413,333 of them will be fully paid and
non-assessable and (ii) each of the Acquired Shares released from the
pledge in accordance with the Pledge Agreement will be, upon such release,
fully paid and non-assessable. The Acquired Shares will be acquired free
and clear of any Lien, claim, charge, restriction or other encumbrance,
except as provided pursuant to the Pledge Agreement, and shall rank pari
passu with the existing issued and outstanding shares of Common.
4.3 Authorization; Noncontravention. Seller has full corporate power and
authority to execute and deliver this Agreement and the other agreements
contemplated hereby to which it is a party and to perform its obligations
hereunder and thereunder. The execution, delivery and performance by
Seller of this Agreement and the other agreements contemplated hereby to
which it is a party and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all requisite
corporate action, and no other corporate act or proceeding on the part of
Seller, its board of directors or stockholders is necessary to authorize
the execution, delivery or performance of this Agreement or the other
agreements contemplated hereby to which Seller is a party and the
consummation of the transactions contemplated hereby or thereby. This
Agreement has been duly executed and delivered by Seller and constitutes,
and the other agreements contemplated hereby which Seller is a party upon
execution and delivery by Seller will each constitute, the valid and
legally binding obligations of Seller, enforceable against Seller in
accordance with their respective terms
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and conditions. Neither the execution and the delivery of this Agreement
and the other agreements contemplated hereby, nor the consummation of the
transactions contemplated hereby or thereby, will: (a) violate, (b)
conflict with, (c) result in a breach of, (d) constitute a default under,
(e) result in the termination or acceleration of or create in any party the
right to accelerate, terminate, modify or cancel, (f) require any
authorization, consent, approval, exemption or other action by or notice to
any Person under, or (g) result in the creation of any Lien on any of
Seller's assets under, Seller's Articles of Incorporation or Bylaws, or any
agreement, contract, lease, loan agreement, indenture, license, permit,
mortgage or other instrument to which Seller is bound or to which any of
its assets is subject or any statute, regulation, rule, injunction,
judgment, order or decree of any governmental agency or court to which the
Seller is subject which could reasonably be expected to have a material
adverse effect on Seller or its condition (financial or otherwise),
earnings, assets, liabilities, business operations or prospects or the
transactions contemplated hereby.
4.4 Brokers' Fees. Seller does not have any liability or obligation to
pay any fees or commissions to any broker or finder with respect to the
transactions contemplated by this Agreement or the Products Agreement.
4.5 SEC Filings; Financial Statements. Seller has filed all of the SEC
Reports required to be filed by it. The SEC Reports (i) were each prepared
in accordance with, and at the time of filing complied with, the
requirements of all applicable rules and regulations and (ii) (except with
respect to the defalcation reported in SEC Reports, to the extent it
affected SEC Reports filed prior to the disclosure thereof) did not at the
time they were filed contain any untrue statement of material fact or omit
to state a material fact required to be stated therein, or necessary in
order to make the statement therein, in the light of the circumstance under
which they were made, not misleading. Each of the financial statements
(including, in each case, any related notes thereto) contained in the SEC
Reports has been prepared in accordance with GAAP consistently applied, and
each presents fairly the financial position of Seller at the respective
dates thereof and the consolidated results of its operations and changes in
cash flow for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
Except as disclosed in EXHIBIT 4.5 hereto, since September 30, 1996, there
has been no material adverse change in the assets or liabilities, or in the
business or condition, financial or otherwise, or in the results of
operations or prospects, of the Seller, whether as a result of any
legislative or regulatory change, revocation of any license or rights to do
business, accident, casualty, labor trouble, act of God, other public act
or otherwise.
4.6 No Other Agreements to Sell. Seller does not have any legal
obligation, absolute or contingent, to any Person to sell material assets
or the business of Seller or to effect
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any merger, consolidation, liquidation, dissolution, recapitalization or
other reorganization of Seller or to enter into any agreement with respect
thereto.
4.7 Products and Product Regulation.
4.7.1 EXHIBIT 4.7 sets forth each Product that is being
manufactured, distributed, sold or marketed by the Seller. With
respect to each such Product, the Seller has obtained all applicable
approvals, clearances, authorizations, licenses, and registrations,
required by federal, state, local or foreign governments or government
agencies, regulating the safety, effectiveness or marketing clearance
for each such Product. In the United States, these include, without
limitation, new drug applications, abbreviated new drug applications,
product license applications, investigational new drug exemptions,
premarket approval applications, premarket notifications under Section
510(k) of the Federal Food, Drug, and Cosmetic Act, investigational
device exemptions and product export applications.
4.7.2 The Seller has made available to Buyer for review all
potentially significant documents delivered to Seller concerning
communications to or from the Food and Drug Administration (the
"FDA"), or prepared by the FDA, which bear in any way on the Seller's
compliance with the FDA regulatory requirements.
4.7.3 The Seller's inventory of Products is in good and marketable
condition in accordance with industry standards and consists of a
quantity and quality usable and saleable in the Ordinary Course of
Business. There are no circumstances or facts existing which may
result in the recall of any of the Products manufactured, distributed,
sold or marketed by the Seller.
4.8 Absence of Undisclosed Liabilities. The Seller has no material
debts, liabilities or obligations of any nature (whether accrued, absolute,
contingent, direct, indirect, perfected, inchoate, unliquidated or
otherwise, whether due or to become due) arising out of any transaction,
series of transactions, action or inaction at or prior to the Closing, or
any state of facts or condition existing at or prior to the Closing
(regardless of when any such liability or obligation is asserted),
including, without limitation, Taxes with respect to or based upon
transactions or events occurring on or before the Closing, except (a)
liabilities and obligations fully reflected on the Latest Balance Sheet,
and (b) liabilities and obligations which have arisen after the date of the
Latest Balance Sheet in the Ordinary Course of Business (none of which
relates to any material indebtedness for borrowed money, breach of
contract, breach of warranty, tort, infringement or violation of law or
arose out of any charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand). The Seller does not have any material
debt, liability
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or obligation, of any nature (as set forth in the preceding sentence) not
required by GAAP to be set forth in a financial statement. For the purpose
of this Section 4.8, any debt, liability, obligation or indebtedness in
excess of $10,000, individually or in the aggregate, shall be deemed
material.
4.9 Absence of Certain Developments. Except as set forth on EXHIBIT 4.9,
since the date of the Latest Balance Sheet, Seller has conducted its
business only in the Ordinary Course of Business, and Seller has not:
4.9.1 discharged or satisfied any Lien or encumbrance or paid any
obligation or liability, other than current liabilities paid in the
Ordinary Course of Business, or canceled, compromised, waived or
released any right or claim;
4.9.2 sold, assigned, licensed or transferred any of its assets
having a fair market value in excess of $10,000 individually or in the
aggregate (including to any employees or Affiliates of Seller), except
for dispositions of assets in the Ordinary Course of Business to
Persons, or mortgaged, pledged or subjected them to any Lien, except
for Permitted Liens, or canceled without fair consideration any debts
or claims owing to or held by it in excess of $10,000 individually or
in the aggregate;
4.9.3 sold, assigned, transferred, abandoned or permitted to lapse
any material Government Licenses or any of the Proprietary Rights or
other intangible assets, or disclosed any proprietary confidential
information to any Person or granted any license or sublicense, or
otherwise permitted the use, of any rights under or with respect to
any Proprietary Rights;
4.9.4 made or granted any bonus (in excess of the lesser of $5,000
and 5% of salary) or any wage or salary increase (in excess of the
lesser of 5% of previous wage or salary and $5,000) to any employee,
officer or director, or made any other material change in employment
terms for any employee, officer or director;
4.9.5 made or granted any increase in, or materially amended or
terminated, any existing plan, program, policy or arrangement,
including any Plan (as defined in Section 4.19.1), employee benefit
plan or arrangement or adopted any new employee benefit plan or
arrangement, or materially amended or renegotiated any existing
collective bargaining agreement or entered into any new collective
bargaining agreement or multiemployer plan;
4.9.6 made any capital expenditures or commitments therefor such
that the aggregate outstanding amount of unpaid obligations and
commitments with respect thereto shall comprise in excess of $100,000
on the Closing Date;
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<PAGE> 18
4.9.7 made any loans or advances to, or guarantees for the benefit
of or entered into, amended or terminated any lease, contract,
agreement or commitment, or taken any other action or entered into any
other transaction with, any of the officers, directors, employees or
Affiliates of Seller, except for the transactions contemplated by this
Agreement;
4.9.8 suffered any extraordinary or material loss, damage,
destruction or casualty loss, whether or not covered by insurance, or
waived any material rights, whether or not covered by insurance and
whether or not in the Ordinary Course of Business;
4.9.9 received notification or gained knowledge that any of Seller's
10 largest customers (based on net revenues for the twelve months
ended December 31, 1996) or suppliers will stop or generally decrease
the rate of business done with the Seller;
4.9.10 suffered any destruction of Seller's books and records;
4.9.11 issued or sold any notes, bonds or other debt securities or
any equity securities or any securities convertible, exchangeable or
exercisable into any equity securities or warrants, options or other
rights to acquire equity securities;
4.9.12 borrowed any amount or incurred or become subject to any
liabilities in excess of $10,000 individually or in the aggregate,
except for current liabilities incurred in the Ordinary Course of
Business;
4.9.13 declared, set aside or paid any dividend or distribution of
cash or other property to shareholders of the Seller with respect to
its stock or purchased, redeemed or otherwise acquired any shares of
its capital stock or any warrants, options or other rights to acquire
its stock, or made any other payments to the shareholders of the
Seller;
4.9.14 made any charitable or other capital contribution or agreed
or pledged to make any charitable or other capital contribution in
excess of $10,000, either individually or in the aggregate;
4.9.15 made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person;
4.9.16 entered into any other single transaction or series of
related transactions in the Ordinary Course of Business with
commitments by such Seller in excess
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of $25,000, or entered into any transaction not in the Ordinary Course
of Business; or
4.9.17 permitted its current liabilities to exceed, in the
aggregate, $1,500,000 (excluding liabilities to the Economic
Development Corporation (EDC).
4.10 Books and Records. The minute books of Seller, as previously made
available to Buyer and Buyer's representatives, contain true and accurate
records of meetings of, and corporate action taken by (including action
taken by written consent), the shareholders and Board of Directors
(including any and all of its Committees) of Seller. Seller has made and
kept books and records and accounts, which in reasonable detail, accurately
and fairly reflect the activities of Seller and Buyer has reasonably relied
on such books and records and accounts.
4.11 Legal Compliance. Seller has complied with all applicable laws,
rules or regulations of any applicable federal, state and local or foreign
governments or agencies as to which the failure to comply could reasonably
be expected to have a material adverse effect on the Company, its condition
(financial or otherwise), assets, liabilities, business operations or
prospects, or its ability to consummate the transactions contemplated
hereby and by the Products Agreement, including, the Federal Food, Drug and
Cosmetic Act and all applicable rules, regulations, practices and policies
of the FDA, and no action, suit, proceeding, hearing, complaint, demand,
notice or investigation has been filed, commenced or, to the best of its
knowledge, threatened against Seller alleging any failure to so comply.
Seller has not, directly or indirectly, paid or delivered any payment of
cash or property, however characterized to any Person, which is in any
manner related to the business or operations of Seller and which Seller
knows or has reason to believe to have been illegal under any federal,
state or foreign law having jurisdiction, and has not participated,
directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers.
4.12 Tax Matters.
4.12.1 Seller has timely filed all Tax Returns with respect to the
Seller and the Plans required to be filed by it, each such Tax
Return has been prepared in compliance with all applicable laws and
regulations, and all such Tax Returns are complete, true and
accurate in all material respects. All Taxes required to be paid by
the Seller in respect of the periods for which Tax Returns are due
have been paid, and the Seller has established an adequate accrual
or reserve in accordance with GAAP consistently applied for the
payment of all Taxes payable in respect of the period, including
portions thereof, subsequent to the last of such periods up to and
including the Closing Date.
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<PAGE> 20
4.12.2 Except as set forth on EXHIBIT 4.12:
4.12.2.1 with respect to each taxable period or event of the
Seller, either such taxable period or event has been audited by
the relevant taxing authority or the time for assessing or
collecting any Tax with respect to each such taxable period or
event has closed and such taxable period or event is not subject
to review by any relevant taxing authority and there are no
disputed tax liabilities for any period or event;
4.12.2.2 no deficiency or proposed adjustment which has not
been settled or otherwise resolved for any amount of Tax has been
proposed, asserted or assessed by any taxing authority against the
Seller or with respect to its activities;
4.12.2.3 Seller has not requested or consented to extend the
time in which any Tax may be assessed or collected by any taxing
authority;
4.12.2.4 Seller has not requested or been granted an
extension of the time for filing any Tax Return to a date later
than the Closing Date;
4.12.2.5 there is no action, suit, taxing authority
proceeding or audit now in progress, pending or, to the best of
its knowledge, threatened against or with respect to the Seller
with respect to any Tax as such Tax relates to or concerns either
Seller or the Plans;
4.12.2.6 Seller is not a party to or bound by any Tax
allocation or Tax sharing agreement or has any current or
potential contractual obligation to indemnify any other Person
with respect to Taxes;
4.12.2.7 no claim has ever been made by a taxing authority
in a jurisdiction where Seller does not pay Tax or file Tax
Returns that Seller is or may be subject to Taxes assessed by
such jurisdiction; and
4.12.2.8 Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor or other
third party.
4.13 Title to Properties; Encumbrances. Except for properties and assets
which have been sold or otherwise disposed of in the Ordinary Course of
Business since the date of the Latest Balance Sheet, Seller has good, valid
and marketable title to: (a) all of its properties and assets (real and
personal, tangible and intangible), reflected in the Latest Balance Sheet;
and (b) all of the properties and assets acquired by it since the Latest
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<PAGE> 21
Balance Sheet; in each case subject to no Lien (other than Permitted
Liens). All of Seller's offices, factories, buildings, improvements,
machinery, equipment and other tangible personal property and assets are in
good condition and repair, except for ordinary wear and tear and are in
conformity with all applicable laws and regulations relating thereto
currently in effect as to which the failure to comply could reasonably be
expected to have a material adverse effect on the Company, its condition
(financial or otherwise), assets, liabilities, business operations or
prospects, or its ability to consummate the transactions contemplated
hereby and by the Products Agreement. Seller owns or leases under valid,
binding and enforceable leases all real estate, offices, improvements,
machinery, equipment and other tangible personal property necessary for the
conduct of Seller's business as currently conducted.
4.14 Facility Site. The Seller does not own, lease or use any real
property other than the property located at 1150 Elijah McCoy Drive,
Detroit, Michigan (the "Facility Site"). Except for the Lien in favor of
the Economic Development Corporation of the City of Detroit, the Seller has
full ownership and good, valid and marketable title in fee simple to the
Facility Site, and enjoys peaceful and undisturbed possession thereof.
There are no pending, or to the Seller's knowledge after reasonable
investigation, where practicable, threatened condemnation proceedings
relating to the Facility Site. The Facility Site and the manufacturing
facility operated thereon have been inspected and approved by the FDA and
are operated in compliance with the FDA's currently applicable Good
Manufacturing Practices. All improvements on the Facility Site and the
operations therein conducted conform to all applicable health, fire,
environmental, safety, zoning and building laws, ordinances and
administrative rules and regulations as to which the failure to comply
could reasonably be expected to have a material adverse effect on the
Company, its condition (financial or otherwise), assets, liabilities,
business operations or prospects, or its ability to consummate the
transactions contemplated hereby and by the Products Agreement. All
buildings, structures, improvements and fixtures owned, leased or used by
Seller in the conduct of its business and the operations therein conform to
all applicable federal, state, local and foreign health, fire,
environmental, safety, zoning and building laws, ordinances and
administrative rules and regulations, and all applicable codes and rules
adopted by national and local associations and boards of insurance
underwriters as to which the failure to comply could reasonably be expected
to have a material adverse effect on the Company, its condition (financial
or otherwise), assets, liabilities, business operations or prospects, or
its ability to consummate the transactions contemplated hereby and by the
Products Agreement; and all such buildings, structures, improvements and
fixtures are in good operating condition and repair.
4.15 Environmental Laws and Regulations. Except as disclosed on EXHIBIT
4.15, Seller has complied and is in compliance with all Environmental and
Safety Requirements as to which the failure to comply could reasonably be
expected to have a material adverse effect on the Company, its condition
(financial or otherwise), assets, liabilities, business
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<PAGE> 22
operations or prospects, or its ability to consummate the transactions
contemplated hereby and by the Products Agreement. For purposes hereof,
"Environmental and Safety Requirements" means all federal, state, local and
foreign statutes, rules, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders
and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and
pollution or protection of the environment (whether indoors or outdoors),
including, without limitation, all those relating to the presence, use,
production, generation, handling, management, disclosure, transportation,
treatment, storage, disposal, recycling, distribution, labeling, testing,
processing, discharge, release, threatened release, control, abatement, or
cleanup of any hazardous materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, radiation, or other forms of energy or pathogens
(collectively, "Hazardous Material"). Seller is not aware of any fact or
circumstance (including, without limitation, any proposed Environmental and
Safety Requirements) that could require Seller to make any capital
expenditure, individually or in the aggregate, in excess of $25,000, to
keep its operations as currently conducted in compliance with all
Environmental and Safety Requirements.
4.15.1 Without limiting the generality of the foregoing, Seller has
obtained and complied with, and is in compliance with, all Government
Licenses required pursuant to Environmental and Safety Requirements
for the occupation of its facilities and the operation of its
business. A list of all such Government Licenses is set forth on
EXHIBIT 4.15.
4.15.2 Seller has not received any written or oral notice, report or
other information regarding any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial, or penal sanctions, or
corrective costs or penal sanctions, relating to it or its facilities
and arising under Environmental and Safety Requirements.
4.15.3 Except as set forth on EXHIBIT 4.15, none of the following
exists at any property or facility owned or operated by Seller: (i)
underground tanks, (ii) surface impoundments; (iii)
asbestos-containing material in any form or condition; or (iv)
materials or equipment containing polychlorinated biphenyls.
4.15.4 Seller has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any
Hazardous Material or owned or operated any facility or property, so
as to give rise to response costs, natural resource damages or other
liabilities or attorneys' fees pursuant to Environmental and Safety
Requirements.
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<PAGE> 23
4.15.5 Seller has not, either expressly or by operation of law,
assumed or undertaken any liability, including any obligation for
corrective or remedial action, of any other Person relating to
Environmental and Safety Requirements.
4.15.6 To Seller's knowledge after reasonable investigation, where
practicable after diligent investigation, the properties currently
owned or used by Seller are free of any environmental defect,
including, without limitation, contamination from Hazardous Materials.
4.15.7 Without limiting the foregoing, no facts, events or conditions
existing or occurring on or before the Closing Date relating to the
past or present facilities, properties or operations of Seller will
prevent, hinder or limit continued compliance with Environmental and
Safety Requirements, give rise to any investigatory, remedial or
corrective obligations pursuant to Environmental and Safety
Requirements, or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to
Environmental and Safety Requirements, including any liabilities
relating to onsite or offsite releases or threatened releases of
Hazardous Materials, personal injury, property damage or natural
resource damage.
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<PAGE> 24
4.16 Intellectual Property.
4.16.1 EXHIBIT 4.16 contains a complete and accurate list of all:
(i) patented or registered Proprietary Rights and pending patent
applications and other applications for registration of Proprietary
Rights owned, used or filed by or on behalf the Seller; (ii) trade
names, corporate names and unregistered trademarks and service marks
owned or used by the Seller; (iii) unregistered copyrights owned or
used by the Seller to the extent protected by common law; (iv)
software and databases owned or used by the Seller; and (v) licenses
or other rights granted by the Seller to any third party with respect
to any Proprietary Rights, and all licenses or other rights granted
by any third party to the Seller with respect to any Proprietary
Rights, in each case identifying the subject Proprietary Right.
4.16.2 To the best of its knowledge, the Proprietary Rights comprise
all of the proprietary or intellectual property rights necessary for
the operation of the Seller's business as currently conducted.
4.16.3 Except as indicated on the EXHIBIT 4.16: (i) there have
been no claims made against the Seller asserting the invalidity,
misuse or unenforceability of any Proprietary Rights; (ii) the
conduct of the Seller's business has not infringed, misappropriated
or otherwise violated, and does not infringe, misappropriate or
otherwise violate the intellectual property rights of any third
party, nor would the continued conduct of the Seller's business as
currently conducted infringe, misappropriate or otherwise violate the
intellectual property rights of any third party; (iii) the Seller has
not received any notices of, or is nor aware of any facts which
indicate a likelihood of, any infringement, misappropriation or other
violation by, or any conflict with, any third party, with respect to
the Proprietary Rights (including any demand or request that the
Seller cease using any Proprietary Rights or license any rights from
any third party); (iv) the Seller is not in breach of any license or
other grant of rights with respect to the Proprietary Rights; and (v)
the transactions contemplated by this Agreement will not have an
adverse effect on Seller's right, title and interest in and to the
Proprietary Rights.
4.17 Contracts.
4.17.1 Except as set forth on EXHIBIT 4.17, Seller is not a party
to any written or oral:
4.17.1.1 contract, agreement or other understanding with
any labor union or contract, agreement or other
understanding for the employment
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<PAGE> 25
of any officer, employee or other person on a full-time,
part-time or consulting basis or any severance or golden
parachute agreements;
4.17.1.2 contract, agreement or indenture relating to the
borrowing of money, or the mortgaging, pledging or otherwise
placing a Lien on any of its assets;
4.17.1.3 contract, agreement or commitment with respect to
the lending or investment of funds to or in other Persons;
4.17.1.4 outstanding powers of attorney executed on behalf
of the Seller or any guaranty;
4.17.1.5 lease or agreement under which it is lessee of or
holds or operates any personal property owned by any other
party for which the annual rental exceeds $10,000;
4.17.1.6 lease or agreement under which it is lessor of or
permits any third party to hold or operate any property,
real or personal, owned or controlled by it for which the
annual rental exceeds $10,000;
4.17.1.7 outstanding bid, contract, agreement or group of
related contracts or agreements or orders with the same
party for the purchase or sale of products or services under
which the undelivered balance of such products or services
has a price in excess of $10,000;
4.17.1.8 license, sublicense or royalty agreement;
4.17.1.9 contract, agreement or understanding with any
employee, officer, director, stockholder or other Affiliate
of Seller;
4.17.1.10 contract which prohibits it from freely engaging
in business anywhere in the world;
4.17.1.11 other contract, agreement or understanding or
group of related contracts, agreements or understandings
with the same party requiring payments after the date hereof
to or by Seller of more than $10,000; or
4.17.1.12 other agreement, contract or understanding,
whether or not entered into in the ordinary course of
business, which, if not performed by Seller or any other
party thereto, would have a material adverse effect
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<PAGE> 26
on the business, assets, liabilities, financial condition,
operating results or business prospects of Seller.
4.17.2 Except as disclosed on EXHIBIT 4.17, (i) no contract or
commitment described on EXHIBIT 4.17 has been, to Seller's knowledge
after reasonable investigation, where practicable, breached or
canceled by the other party that has not been duly cured or
reinstated, (ii) Seller has performed all of its obligations
required to be performed by it under such contracts and commitments
to the date of this Agreement and the Closing Date and is not in
receipt of any written claim of default or breach under any such
contract or commitment, and (iii) to its knowledge, no event has
occurred which with the passage of time or the giving of notice or
both would result in a breach or default under any such contract or
commitment.
4.18 Litigation; Proceedings. Except as disclosed on EXHIBIT 4.18, there
are no actions, suits, proceedings, hearings, orders, charges, complaints,
investigations or claims pending or, to the best of its knowledge,
threatened against or affecting Seller, its assets or the Plans (as defined
in Section 4.19.1 hereof) (or pending or, to the best of its knowledge,
threatened against or affecting any of Seller's officers, directors,
employees or shareholders), or to which Seller or any of its assets may be
bound or affected, at law or in equity, or by any federal, state,
municipal, foreign or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, and, to the best of
its knowledge, there is no basis for any of the foregoing; nor are there
any pending or, to seller's knowledge, after reasonable investigation where
practicable its knowledge, threatened investigations, nor, to its
knowledge, is there any basis for any such investigation; neither the
Seller nor, to Seller's knowledge after reasonable investigation, where
practicable, any of its respective Affiliates, officers or directors is
subject to any judgment, order or decree of any court or governmental
agency; and Seller has not received any opinion or memorandum or legal
advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage.
4.19 Employee Benefits.
4.19.1 Except as set forth on EXHIBIT 4.19, with respect to current
or former employees of Seller, independent contractors, or the
spouses, beneficiaries or dependents thereof, Seller does not
maintain and has not maintained, does not contribute to and has not
contributed to, does not have and has not had any obligation to
contribute to, does not have and has not had any liability or
potential liability with respect to any (i) qualified defined
contribution or defined benefit plans or arrangements (whether or
not terminated) which are employee pension benefit plans (as defined
in Section 3(2) of ERISA) (the "Employee Pension
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<PAGE> 27
Plans"); (ii) any ongoing or terminated funded or unfunded employee
welfare benefit plans (as defined in Section 3(1) of ERISA) ("Employee
Welfare Plans"); or (iii) any plan, policy, program or arrangement
(whether or not terminated) which provides nonqualified deferred
compensation benefits, bonus benefits or compensation, incentive
benefits or compensation, severance benefits or compensation, benefits
or compensation payable on account of a "change of ownership or
control" (including a change in ownership of a substantial portion of
the assets of Seller) or any program, plan, policy or arrangement
which provides any health, life, disability, accident, vacation,
tuition reimbursement or other fringe benefits ("Other Plans").
Except as set forth on EXHIBIT 4.19, Seller does not participate and
has not participated in or contributed to any Multiemployer Plan nor
does Seller have any other liability, including any potential
withdrawal liability, with respect to any Multiemployer Plan, and
Seller has not incurred any current or potential withdrawal liability
as a result of a complete or partial withdrawal (or potential partial
withdrawal) from any Multiemployer Plan. Seller does not maintain or
have any obligation to contribute to (or any other liability with
respect to) any funded or unfunded Employee Welfare Plan,
Multiemployer Plan or Other Plan which provides post-retirement
health, accident or life insurance benefits to current or former
employees, current or former independent contractors, current or
future retirees, their spouses, dependents or beneficiaries, other
than medical benefits required to be provided to former employees,
their spouses and other dependents under Part 6 of Subtitle B of Title
I of ERISA or Code Section 4980B. (Any Employee Pension Plan, any
Employee Welfare Plan, any Other Plan and any Multiemployer Plan shall
be referred to herein collectively as the "Plans.")
4.19.2 All Plans (and related trusts and insurance contracts)
materially comply in form and in operation with the applicable
requirements of ERISA and the Code. The Employee Pension Plans which
are employee pension benefit plans (as defined in section 3(2) of
ERISA) meet the requirements of "qualified plans" under Section 401(a)
of the Code, and each such Employee Pension Plan has received a
favorable determination letter from the Internal Revenue Service. The
Internal Revenue Service has taken no action to revoke any such letter
and, to the best of its knowledge, there is nothing that would cause
the Internal Revenue Service to take action to revoke any such letter.
4.19.3 Except as set forth on EXHIBIT 4.19, all required reports and
descriptions (including Form 5500 Annual Reports, summary annual
reports and the summary plan descriptions) with respect to all Plans
(other than Multiemployer Plans) have been properly filed with the
appropriate government agency and distributed as required by law to
employees and/or their beneficiaries and Seller has complied
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<PAGE> 28
with the requirements of Part 6 of Subtitle B of Title V of ERISA or
Section 4980B of the Code.
4.19.4 With respect to all Employee Pension Plans and all
Multiemployer Plans, all contributions of Seller which are due
(including all employer contributions and employee salary reduction
contributions) have been paid to such Employee Pension Plans and
Multiemployer Plans and all contributions for periods prior to the
Closing Date which are not yet due have been made or accrued. With
respect to all Employee Welfare Plans and all Other Plans, all
premiums and/or contributions, whether or not due, for prior plan
years and the current plan year for the period ending on the Closing
Date have been paid or accrued. None of the Plans maintained by the
Seller has any unfunded liabilities which are not funded or otherwise
accrued.
4.19.5 Except as set forth on EXHIBIT 4.19, none of the Plans is a
"defined benefit plan" (as defined in Section 3(35) of ERISA) or a
Multiemployer Plan. Seller has not incurred any liability to the
Pension Benefit Guaranty Corporation, the Internal Revenue Service,
the Department of Labor, any other governmental agency, any
Multiemployer Plan or any Person with respect to any Plan subject to
Title IV of ERISA and which is currently or previously maintained by
members of the controlled group of companies (as defined in Section
414 of the Code) that includes Seller (the "Controlled Group") that
has not been satisfied in full, and no condition exists that presents
a risk to Seller or any other member of the Controlled Group of
incurring such a liability, other than liability for premiums due the
Pension Benefit Guaranty Corporation.
4.19.6 With respect to each Plan, (i) there have been no prohibited
transactions as defined in Section 406 of ERISA and in Section 4975 of
the Code, (ii) no fiduciary (as defined in Section 3(21) of ERISA) has
any liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the
assets of the Plans, (iii) no fiduciary has engaged in any
transactions with respect to the Plans which could subject Seller, any
fiduciary, any plan administrator or any party dealing with any such
plan to either a civil penalty assessed pursuant to Section 501(i) of
ERISA or the tax or penalty on prohibited transactions imposed by
Section 4975 of the Code, and (iv) no actions, investigations, suits
or claims with respect to the assets thereof are pending or, to the
best of its knowledge, threatened, and, to the best of its knowledge,
there are no facts which would give rise to or could reasonably be
expected to give rise to any such actions, suits or claims against any
Plan, any fiduciary with respect to such Plans or the assets of such
Plans.
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<PAGE> 29
4.19.7 Except as set forth on EXHIBIT 4.19, with respect to each
Plan and any cafeteria plans under Section 125 of the Code, to the
extent applicable, the Seller has furnished to Buyer true and
complete copies of (i) the plan documents, summary plan descriptions,
any other document filed or required to be filed with a governmental
agency or any document distributed to any employee, participant or
beneficiary of such Plan, (ii) the most recent determination letter
received from the Internal Revenue Service, (iii) the last Form 5500
Annual Report and actuarial report, and (iv) all related trust
agreements, insurance contracts or other funding agreements which
implement the Plans.
4.19.8 Neither Seller nor any Person acting on behalf of Seller
has, in contemplation of any corporate transaction involving Seller,
issued any written communication to, or otherwise made or entered
into any legally binding commitment with, any employees of the Seller
to the effect that, following the date hereof, (i) any benefits or
compensation provided to such employees under the Plans or under any
other plan or arrangement will be enhanced, (ii) any new plans or
arrangements providing benefits or compensation will be adopted,
(iii) any Plans will be conducted for any period of time, or (iv) any
plans or arrangements provided by Seller will be made available to
such employees.
4.20 Material Government License Permits. EXHIBIT 4.20 contains a
complete listing and summary description of all material Government
Licenses held by the Seller for use in the conduct of its business. Except
as indicated on EXHIBIT 4.20, Seller holds all of the Government Licenses
that are necessary to own and operate its business as presently conducted,
including all Government Licenses required under any federal, state or
local law relating to public health and safety, employee health and safety,
pollution or protection of the environment, including without limitation,
the Federal Food, Drug and Cosmetic Act. Seller is in compliance with the
terms and conditions of the Government Licenses on EXHIBIT 4.20 and has
received no notices that it is in violation of any of the terms or
conditions of such Government Licenses. Seller has taken all necessary
action to maintain and renew all such Government Licenses. No loss or
expiration of any such Government License is pending, foreseeable or, to
Seller's knowledge after reasonable investigation, where practicable,
threatened, other than expiration in accordance with the terms thereof.
The consummation of the transactions contemplated hereby will not result in
any revocation, cancellation or suspension of any Government License.
4.21 Employees. Seller has complied with all applicable laws relating to
the employment of labor, including provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes, the Worker Adjustment and Retraining Notification
Act, as amended, and the Immigration Reform and Control Act of 1986, as
amended. There are no administrative charges or court complaints pending
or, to Seller's knowledge after reasonable investigation, where
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<PAGE> 30
practicable, threatened against Seller before the U.S. Equal
Employment Opportunity Commission or any state or federal court or
agency concerning alleged employment discrimination, sexual
harassment, ethnic or racial discrimination or any other matters
relating to the employment of labor. There is no unfair labor
practice, charge or complaint pending or, to Seller's knowledge after
reasonable investigation, where practicable, threatened against
Seller before the National Labor Relations Board or any similar state
or local body. Within the last three (3) years, Seller has not
experienced any union organization attempts, labor disputes or
general work stoppage or slowdowns due to labor disagreements. There
is no labor strike, dispute, general work stoppage or slowdown
pending or, to Seller's knowledge after reasonable investigation,
where practicable, threatened. There is no request for representation
pending and no question concerning representation has been raised
within the past two years. There is no grievance or arbitration
proceeding pending. The Seller is not party to nor bound by any
collective bargaining agreement or other labor agreement.
4.22 Product Liability. Seller has no liability for, and to sellers
knowledge, after reasonable investigations, where practicable, there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Seller which
could give rise to, any liability arising out of any injury to individuals
as a result of the use of any product manufactured, sold, or delivered by
the Seller.
4.23 Insurance. EXHIBIT 4.23 sets forth an accurate description of each
insurance policy to which Seller has been a party, a named insured or
otherwise the beneficiary of coverage at any time during the past two
years. All of such insurance policies are legal, valid, binding and
enforceable and in full force and effect and Seller to Seller's knowledge
after reasonable investigation where practicable has never been in breach
or default with respect to its obligations under such insurance policies.
Except as set forth on the EXHIBIT 4.23, Seller has not been denied
insurance coverage requested by or on behalf of it within the past two
years.
4.24 Affiliate Transactions. Except as disclosed on EXHIBIT 4.24, no
director, officer or employee of Seller (or any of the relatives or
Affiliates of the aforementioned) is a party to any agreement, contract,
commitment or transaction with the Seller, or has any interest in any
property, whether real, personal or mixed, or tangible or intangible, used
in or necessary to the business of Seller. Without limiting the foregoing,
to the best of its knowledge, no director, officer or employee of Seller
(or any of the relatives or Affiliates of the aforementioned) is a director
of any customer or supplier of Seller.
4.25 Not A Business Combination; Shares Acquired Not Control Shares. The
vote required by Section 780 of the Michigan Business Corporation Act does
not, and shall not, apply to (i) the transactions contemplated by this
Agreement, (ii) the transactions
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contemplated by the Product Agreement or (iii) any future
transaction, whether or not a "business combination" as defined
pursuant to Section 776 of the Michigan Business Corporation Act,
between Seller, on the one hand, and the Buyer or any of its existing
or future Affiliates, on the other hand. The transactions
contemplated by this Agreement and the Products Agreement shall not,
individually or in the aggregate, constitute a "Control Share
Acquisition" for the purposes of, and as defined pursuant to, Chapter
7B of the Michigan Business Corporation Act.
4.26 Registration Rights. Except for the rights existing pursuant
to the Registration Rights Agreement, no holder of Common or any
other security issued by the Company will have any right to require
the registration thereof (or of any security receivable upon the
exercise or conversion thereof) under the Securities Act or, except
as set forth in Section 4.26 hereof, the right to include any such
security (or any security receivable upon the exercise or conversion
thereof) in a registration statement filed by the Company under the
Securities Act. EXHIBIT 4.26 contains a complete and accurate
description of the terms of all agreements relating to the inclusion
of securities in a registration statement, including without
limitation, (i) the names of the Holders of such securities, (ii) the
type and quantity of securities eligible to be so included, (iii) the
preconditions to any such inclusion and (iv) any priority of such
securities to be included in an underwritten public offering.
4.27 General. The statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be
correct and complete in all material respects as of the Closing Date
(as though made then and as though the Closing Date were substituted
for the date of this Agreement throughout this Section 4). Neither
this Section 4 nor any certificate delivered by Seller contains or
will contain, when taken as a whole, any untrue statement of a
material fact or omits or will omit a material fact necessary to make
the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
5. PRE-CLOSING COVENANTS.
The parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
5.1 General. Each of the parties will use its reasonable best efforts to
take all actions and to do all things necessary in order to consummate and
make effective the transactions contemplated by this Agreement (including,
without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered).
5.2 Notices and Consents. Each of the parties will give any notices to,
make any filings with, and use its reasonable best efforts to obtain, any
authorizations, consents and
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approvals of governmental agencies and third parties required in connection
with this Agreement.
5.3 Full Access. The Seller will permit representatives of Buyer to have
full and complete access at all reasonable times, upon prior notice, and in
a manner so as not to interfere with the normal business operations of the
Seller, to all premises, properties, personnel, customers, suppliers,
books, records (including tax records), contracts and documents of Seller.
5.4 Additional Financial Statements and Other Information. As soon as
reasonably practicable after they become available, Seller shall furnish to
Buyer (i) the quarterly financial statements of Seller, which shall have
been prepared in accordance with GAAP consistently applied, (ii) all
monthly financial statements or reports of the Company which shall have
been prepared in a manner consistent with past practice, (iii) copies of
all proxy statements, notice and reports as it shall send to its public
stockholders and copies of all registration statements and all reports
which it files with the Securities and Exchange Commission or with any
domestic securities exchange on which any of its securities are listed, and
(iv) copies of all press releases and other statements made available to
the public concerning material developments in the business of Seller. In
addition, Seller shall give prompt notice to the Buyer of any material
developments involving the operations or activities of Seller.
5.5 Hexal Options. Seller shall use its best efforts to negotiate,
execute and deliver an agreement with Hexal-Pharma GmbH regarding an
amendment to the Product Options issued by Seller to Hexal-Pharma GmbH.
5.6 Amendment to Articles of Incorporation. Seller's Board of Directors
shall recommend for approval of Seller's stockholders an amendment to
Seller's Articles of Incorporation, in a form reasonably acceptable to
Buyer, for the purpose of increasing the number of authorized shares of
Common to not less than 30,000,000, and shall take such actions as
reasonably necessary so that such proposed amendment will be considered by
Seller's stockholders at the first annual meeting of stockholders to occur
after the date hereof, or if no such annual meeting is to be held on or
before June 30, 1997, then at a special meeting of stockholders called for
the purpose of voting on such amendment to occur not later than June 30,
1997.
5.7 Other Affirmative Covenants of the Seller. Seller shall:
5.7.1 conduct its business and operations only in the Ordinary Course
of Business;
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5.7.2 keep in full force and effect its corporate existence and all
Government Licenses relating or pertaining to its business;
5.7.3 keep its business organizations and properties intact,
including its present business operations and physical facilities and
Seller's present relationships with lessors, licensors, suppliers,
customers, distributors, manufacturers and others having business
relations with it in the Ordinary Course of Business; and
5.7.4 promptly inform Buyer in writing of any variances from the
representations and warranties contained in Section 4 hereof or any
breach of any covenant hereunder by the Seller.
5.8 Negative Covenants of the Seller.
5.8.1 Except as otherwise provided herein, Seller shall
not:
5.8.1.1 except as disclosed on EXHIBIT 5.8, take any action
that would require disclosure under Section 4.9 hereof;
5.8.1.2 take any action that would or omit to take any
action the omission of which would reasonably be anticipated
to have a material and adverse effect upon the business,
assets, liabilities, financial condition, operating results
or business prospects of the Seller;
5.8.1.3 without the prior written approval of Buyer, (A)
enter into any contract (1) out of the Ordinary Course of
Business, or (2) restricting in any way the conduct of
Seller's business or operations, (B) make any loans, (C)
increase any officer's or employee's compensation, incentive
arrangements or other benefits, except for increases for
employees (but not officers) made in the Ordinary Course of
Business, (D) establish or, except in accordance with past
practice or as may be required by law, contribute to any
pension, retirement, profit sharing or stock bonus plan or
multiemployer plan covering employees of Seller, (E) pay any
dividends, redeem, purchase or otherwise acquire directly or
indirectly issued and outstanding capital stock, or any
outstanding rights or securities exercisable or exchangeable
for or convertible into capital stock of Seller, (F) amend
the charter or bylaws of Seller or issue or agree to issue
any capital stock or any rights to acquire, or securities
convertible into or exchangeable for, any of the capital
stock of Seller, (G) directly or indirectly engage in any
transaction, arrangement or contract with any employee,
officer, director, partner, stockholder or other insider or
Affiliate of Seller
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which is not at arm's length, or (H) execute any guarantee,
issue any debt or borrow any money, except for current
liabilities from suppliers in the Ordinary Course of
Business, or buy or sell any assets out of the Ordinary
Course of Business;
5.8.1.4 except upon the exercise or conversion of any
options, warrants or shares of preferred stock outstanding
on the date hereof issue any securities to any Person or
incur any additional Indebtedness without the prior written
consent of Buyer;
5.8.1.5 negotiate with any other Person engaged in the
pharmaceutical business with respect to any material
transaction between Seller and such Person, without the
prior written approval of Buyer; provided, however, that
nothing herein shall preclude Seller from honoring all of
its contractual commitments existing on the date hereof with
R.P. Scherer Corporation, McKesson, Hexal-Pharma GmbH & Co,
KG, Clonmel Chemicals Co., Ltd., Apotex, Inc. and another
pharmaceutical company with respect to which the Seller has
a confidentiality agreement; or
5.8.1.6 enter into any transaction, arrangement or contract
(including any transfer of the Seller's assets or placing a
Lien on the Seller's assets) except on an arm's-length basis
in the Ordinary Course of Business.
5.8.2 Until consummation of the transactions contemplated hereby
or termination of this Agreement pursuant to Section 8.1 hereof,
neither the Seller nor any of its Affiliates, representatives, agents,
officers, employees or directors shall, directly or indirectly, (i)
submit, solicit, initiate, encourage or discuss any proposal or offer
from any Person or enter into any agreement or accept any offer
relating to any (a) reorganization, liquidation, dissolution or
recapitalization of Seller, (b) borrowings or indebtedness of Seller,
(c) merger or consolidation involving Seller, (d) purchase or sale of
any assets or capital stock (other than a purchase or sale of assets
in the Ordinary Course of Business), or (e) similar transaction or
business combination involving Seller or any of its assets (the
foregoing items (a) through (e) collectively referred to herein as a
"Business Sale"), or (ii) furnish any information with respect to,
assist or participate in or facilitate in any other manner any effort
or attempt by any Person to do or seek to do any of the foregoing,
except with the prior written consent of Buyer.
5.9 Additional Covenant of Buyer. Between the date hereof and the Closing
Date, except as otherwise expressly provided herein, Buyer shall promptly
inform Seller in
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writing of any variances from the representations and warranties contained
in Section 3 hereof or any breach of any covenant hereunder by Buyer.
6. CONDITIONS TO OBLIGATION TO CLOSE.
6.1 Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by Buyer in connection with the
Closing is subject to satisfaction of the following conditions:
6.1.1 The representations and warranties set forth in Section 4 above
shall be true and correct in all material respects at and as of the
Closing Date;
6.1.2 Seller shall have performed and complied in all material
respects with all of its covenants and agreements hereunder required
to be performed by it prior to the Closing;
6.1.3 There shall not be any pending or threatened injunction,
judgment, order, decree, act or ruling by any court or governmental
agency which presents a substantial risk to the restraint or
prohibition of the transactions contemplated by this Agreement or the
obtaining of material damages or other relief in connection therewith;
6.1.4 Seller shall have delivered to Buyer a certificate to the
effect that each of the conditions specified above in Sections 6.1.1,
6.1.2 and 6.1.3 is satisfied;
6.1.5 Seller shall have delivered to Buyer stock certificates
representing all of the Acquired Shares;
6.1.6 Seller shall have delivered to Buyer (i) good standing
certificates from the State of Michigan and any other states in which
the nature of its business or properties requires it to qualify to do
business as of the most recent practicable date, (ii) a copy of the
Articles of Incorporation and Bylaws of Seller which are certified as
of a recent date, in the case of the Articles of Incorporation, by the
Secretary of State of the State of Michigan and in the case of the
Bylaws by an appropriate officer of Seller and (iii) certified copies
of the resolutions duly adopted by the Board of Directors of Seller
authorizing the execution, delivery and performance of this Agreement
and the other agreements contemplated hereby, and the consummation of
all transactions contemplated hereby and thereby;
6.1.7 The Board of Directors of Seller shall consist of not more than
eleven members and shall include not less than six persons designated
in writing by
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Buyer to serve as its nominees; the Executive Committee of the Board
of Directors of Seller shall consist of not more than three members,
not less than two of which are directors nominated by Buyer; and the
Chief Executive Officer and Chairman of Seller shall be persons
approved of, in writing, by Buyer.
6.1.8 Seller shall have delivered to Buyer such other certificates
and documents as are required hereby or are reasonably requested by
Buyer (including, without limitation, copies of all governmental and
third party consents).
6.1.9 Seller shall have delivered to Buyer an opinion of Seyburn,
Kahn, Ginn, Bess, Deitch and Serlin, counsel to Seller, with respect
to the matters set forth in EXHIBIT 6.1.9 attached hereto, in form and
substance reasonably satisfactory to Buyer;
6.1.10 Seller and Buyer shall have entered into a product agreement
in substantially the form attached hereto as EXHIBIT 6.1.10 (the
"Products Agreement") and upon the Closing such agreement shall be
valid, binding and effective as to the parties thereto;
6.1.11 Seller, Buyer, Joliat and Hagelstein shall have entered into a
voting agreement in substantially the form attached hereto as EXHIBIT
6.1.11 (the "Voting Agreement") and upon the Closing such agreement
shall be valid, binding and effective as to the parties thereto;
6.1.12 Seller shall have adopted an amendment to its By-laws in
substantially the form attached hereto as EXHIBIT 6.1.12 (the "By-law
Amendment") and upon the Closing such amendment shall be binding and
effective;
6.1.13 Seller, Joliat and Hagelstein shall have entered into a letter
agreement in substantially the form attached hereto as EXHIBIT 6.1.13
(the "Contribution Agreement") and upon the Closing such agreement
shall be valid, binding and effective as to the parties thereto;
6.1.14 Seller and William Hurd shall have entered into an Amendment
to Employment Agreement in substantially the form attached hereto as
EXHIBIT 6.1.14 and upon the Closing such amendment shall be valid,
binding and effective as to the parties thereto;
6.1.15 Seller and Alan J. Hammer shall have entered into an Amendment
to Employment Agreement in substantially the form attached hereto as
EXHIBIT 6.1.15 and upon the Closing such amendment shall be valid,
binding and effective as to the parties thereto;
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6.1.16 Seller and Robert Kurkiewicz shall have entered into an
Amendment to Employment Agreement in substantially the form attached
hereto as EXHIBIT 6.1.16 and upon the Closing such amendment shall be
valid, binding and effective as to the parties thereto;
6.1.17 Seller and Buyer shall have entered into a Registration
Rights Agreement in substantially the form attached hereto as EXHIBIT
6.1.17, and such agreement shall be valid, binding and effective as
to the parties thereto.
6.1.18 Seller and the Economic Development Commission of the City of
Detroit shall have entered into a definitive agreement with respect to
the restructuring of Seller's debt to the Economic Development
Commission of the City of Detroit in a form reasonably acceptable to
Buyer and containing terms substantially similar to those set forth in
EXHIBIT 6.1.18 hereof, and such definitive agreements shall have
become, or upon the Closing will have become, valid, binding and
effective on the parties thereto.
6.1.19 The Reserve Bank of India and/or the government (or any agency
or department) of the Republic of India shall have granted final
approval of Buyer's remittance of funds in accordance with the terms
hereof and the Products Agreement;
6.1.20 Since the date of this Agreement, there shall have been no
events or conditions, which, either individually or in the aggregate,
has had or could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), properties, assets,
liabilities, business operations or prospects of Seller, and Buyer
shall be provided with a certificate from the Seller to that effect at
the Closing;
6.2 Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
6.2.1 The representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
6.2.2 Buyer shall have performed and complied in all material
respects with all of its covenants and agreements hereunder required
to be performed by it prior to the Closing;
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6.2.3 To Buyer's knowledge, after reasonable investigation, where
practicable, there shall not be any pending or threatened injunction,
judgment, order, decree or ruling by any court or governmental agency
which presents a substantial risk to the restraint or prohibition of
the transactions contemplated by this Agreement or the obtaining of
material damages or other relief in connection therewith;
6.2.4 Buyer shall have delivered to Seller a certificate to the
effect that each of the conditions specified above in Sections 6.2.1,
6.2.2 and 6.2.3 is satisfied;
6.2.5 Buyer shall have delivered to Seller the Initial Payment in
accordance with Section 2.2; and
6.2.6 Buyer shall have executed and delivered the Pledge Agreement
substantially in the form attached hereto as EXHIBIT 6.2.6 (the
"Pledge Agreement") and delivered all necessary stock powers required
thereunder and such agreement shall be valid, binding and effective as
to the parties thereto.
7. STOCK EXCHANGE LISTING
7.1 Best Efforts to Relist on NASDAQ. From the date hereof and for a one
year period after the Closing, the Seller agrees to use all commercially
reasonable efforts to cause its Common to become admitted for trading on
the NASDAQ Small Cap Market.
7.2 Listing of Common Purchased Hereunder. In the event that the Common
shall be listed for trading on any national securities exchange or become
admitted for trading on the NASDAQ National Market or the NASDAQ Small Cap
Market, such listing or admission (to the extent permitted by the rules of
such exchange or NASDAQ market) shall include all Acquired Shares.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
8.1 Survival.
8.1.1 All representations, warranties, covenants and agreements of
Seller contained in this Agreement shall survive the Closing and
continue in full force and effect thereafter until ninety days after
delivery to Seller's Board of audited financial statements for Seller
for its fiscal year ending in 2000 except representation and
warranties on Stock options on which liabilities will expire on
December 31, 2005 and will not be affected by any examination made by
or on behalf of Buyer, the knowledge of any of its officers,
directors, stockholders, employees or agents, or the acceptance of any
certificate or opinion. In addition,
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no indemnification will be required from Seller until the aggregate of
Buyer's damages exceed $50,000.
8.1.2 All representations, warranties, covenants and agreements of
Buyer contained in this Agreement shall survive the Closing and
continue in full force and effect thereafter until ninety days after
delivery of audited financial statements for Seller for its fiscal
year ending in 1999 and will not be affected by any examination made
by or on behalf of Seller, the knowledge of any of its officers,
directors, stockholders, employees or agents or the acceptance of any
certificate or opinion.
8.2 Indemnification. Seller shall indemnify and hold harmless Buyer and
its Affiliates, directors, officers, advisors, agents and employees (the
"Indemnified Parties"), to the fullest extent lawful, from and against any
and all losses, damages, claims, liabilities, actions and expenses
(including, without limitation, costs of investigation, preparing or
defending any such claim or action and reasonable legal fees and expenses
(collectively "Losses") arising out or in connection with (i) any third
party claims asserted against an Indemnified Party arising out of or in
connection with the transactions contemplated hereby or (ii) the material
breach of any warranty, representation, covenant or agreement of the Seller
contained in this Agreement or any of the agreements contemplated hereby
(as to which breach Seller has received notice and not less than 30 days to
cure), and including, without limitation, any such Losses arising out of
transactions entered into or events occurring prior to the Closing. The
term "Losses" as used in this Section 8.2 is not limited to matters
asserted by third parties against an Indemnified Party, but includes Losses
incurred or sustained by any Indemnified Party in the absence of third
party claims.
8.3 Remedy. The Seller hereby specifically agrees that its only remedy
against the Buyer in case of any default by the Buyer of any of the terms
of this Agreement, is enforcement of its rights to recover the unpaid
balance moneys payable by the Buyer to the Seller, as purchase
consideration for 5.3 million shares i.e.; $7.5 million in the aggregate,
the idea being that under no circumstances Buyer's financial obligations
under this Agreement shall exceed $7.5 million and the Buyer will not be
liable for any extra or additional or consequential or liquidated or
director or indirect damages or claims or enhancement in price or losses of
opportunities or interest, either from the Seller or from other persons
whether claiming through the Seller or otherwise. The Seller hereby
specifically waives and foregoes all its other rights or remedies which it
may have against the Buyer under Michigan Business Corporation Act or any
other law, rules, bylaws, Articles of Incorporation, regulations or in
torts. The Seller also further hereby confirms that if it has committed a
prior material breach of any of the terms and conditions of this Agreement
or if Buyer's breach of any of the terms and conditions is directly or
indirectly caused by or motivated by or is the result of or is a defence
against any breach
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or action or omission of the Seller, then the Seller will have the right or
remedy whatsoever against the Buyer including the right to recover the
balance purchase consideration money for the shares.
8.4 Arbitration. Any dispute between the parties regarding any provision
of this Agreement shall be resolved by binding arbitration before the
London Court of International Arbitration according to its rules of
commercial arbitration. Judgment upon the award of the arbitrators may be
entered by any court of competent jurisdiction.
8.5 Finder's or Broker's Fees. Buyer represents and warrants and Seller
represents and warrants that, it has dealt with no broker or finder in
connection with any of the transactions contemplated by this Agreement,
and, insofar as it knows, no broker or other person is entitled to any
commission or finder's fee in connection with any of these transactions.
Each of the parties hereby agrees to indemnify and hold harmless one
another against any loss, liability, damage, cost, claim or expense
incurred by reason of any brokerage, commission or finder's fee alleged to
be payable by reason of any act, omission or statement of indemnifying
party.
9. TERMINATION.
9.1 Termination of Agreement. The Agreement may be terminated as provided
below:
9.1.1 Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing;
9.1.2 Either Buyer or Seller may terminate this Agreement if the
Closing has not occurred by June 30, 1997; provided that neither
Buyer, on the one hand, nor Seller, on the other hand, will be
entitled to terminate this Agreement pursuant to this Section 9.1.2 if
such party's breach of this Agreement has prevented the consummation
of the transaction contemplated hereby;
9.1.3 Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing in the event there has been a
material breach by Seller of any representation, warranty, covenant or
agreement contained in this Agreement, and Buyer has notified the
Seller of the breach, and the breach has continued without cure for a
period of thirty (30) days after the notice of breach; and
9.1.4 Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing in the event there has been a
material breach by
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the Buyer of any representation, warranty, covenant or agreement
contained in this Agreement, and Seller has notified Buyer of the
breach, and the breach has continued without cure for a period of
thirty (30) days after the notice of breach.
9.2 Effect of Termination. If any party terminates this Agreement
pursuant to the Section 9.1 above, all rights and obligations of the
parties hereunder shall terminate without any liability of any party to any
other party (except for any liability of any party then in breach).
10. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.
Unless required by law (in which case the Seller hereby agrees to give
Buyer a reasonable prior opportunity to review and comment upon any proposed
disclosure), after the date hereof through and after the Closing Date, Seller
shall not issue any press release or make any public announcement relating to
the subject matter of this Agreement or the transactions contemplated hereby
without the prior written approval of Buyer.
11. NO THIRD-PARTY BENEFICIARIES.
This Agreement shall not confer any rights or remedies upon any person
other than the parties and their respective affiliates, officers, directors,
heirs, executors, administrators, successors and permitted assigns.
12. FURTHER ASSURANCES.
The parties hereto hereby agree to execute and deliver to one another such
further instruments and other documentation as may be requested by any other
party hereto at any time and from time to time to carry out the terms of this
Agreement.
13. ENTIRE AGREEMENT.
This Agreement and the exhibits and schedules attached hereto and the
documents executed and delivered pursuant hereto constitute the entire agreement
between the parties with respect to the subject matter contained herein, and
supersede all prior and contemporaneous oral and written communications and
agreements with respect thereto.
14. BINDING EFFECT; ASSIGNMENT.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors and
permitted assigns. No party has the right to assign any of its rights or
obligations hereunder without the prior written consent of the other parties
hereto, except that Buyer may assign this Agreement and any of the provisions
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hereunder to any Affiliate of Buyer without the consent of Seller. In addition,
Buyer may assign its rights under this Agreement for collateral or other
security purposes to any lenders providing bonafide financing to Buyer without
the consent of Seller.
15. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instruments.
16. HEADINGS.
Headings of sections shall be deemed to be included for purposes of
convenience only and shall not affect the interpretation of this Agreement.
17. NOTICES.
Any notices or consents required or permitted by this Agreement shall be in
writing and shall be deemed delivered if sent by certified mail, postage
prepaid, return receipt requested, or overnight delivery service (receipt
confirmed), or facsimile (receipt confirmed), as follows, unless such address is
changed by written notice hereunder:
If to Seller: Caraco Pharmaceutical Laboratories, Ltd.
1150 Elijah McCoy Drive
Detroit, Michigan 48202
Attention: President
with a copy to:
Fred B. Green, Esq.
Seyburn, Kahn, Ginn, Bess, Deitch and Serlin
2000 Town Center
Suite 1500
Southfield, Michigan 48075-1195
If to Buyer: Sun Pharmaceutical Industries Limited
Synergy House, Subhanpura
Gorwa Road, Baroda, 390-007 India
Attention: Mr. Dilip Shanghvi
and
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Sun Pharmaceutical Industries Limited
3, Narayan Building, 23, L.N. Road
Dadar (E), Mumbai - 400 014 India
Attention: Mr. Sudhir Valia
with a copy to:
Michael D. Rosenthal, Esq.
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Any notice delivered hereunder shall be deemed given when actually received.
18. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Michigan.
19. AMENDMENTS AND WAIVERS.
This Agreement may be amended and any provision hereof waived only in a
writing signed by the party against whom an amendment or waiver is sought to be
enforced. The parties hereto shall have the right at all times to enforce the
provisions of this Agreement in strict accordance with the terms hereof,
notwithstanding any conduct or custom on the part of such party in refraining
from so doing at any time or times. The failure of any party at any time to
enforce its rights under such provisions strictly in accordance with the same
shall not be construed as having created a custom in any way or manner contrary
to specific provisions of this Agreement or as having in any way or manner
modified or waived the same.
20. SEVERABILITY.
If any provision of this Agreement shall be held invalid under any
applicable law, such invalidity shall not affect any other provision of this
Agreement that can be given effect without the invalid provision, and, to this
end, the provisions hereof are severable.
21. EXPENSES.
Except as otherwise expressly provided in this Agreement, the parties will
bear their respective costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. Notwithstanding the foregoing, Seller shall pay fees in connection with
the issuance of any Acceptable Letter of Credit in an amount
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not to exceed 1% of the face amount of any such Acceptable Letter of Credit,
with Buyer paying any such fees in excess thereof.
22. CONSTRUCTION.
The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any foreign, federal, state or local statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context requires.
23. INCORPORATION OF EXHIBITS, ANNEXES AND SCHEDULES.
The Exhibits and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
themselves or by their duly authorized representatives, under seal, the day and
year first above written.
CARACO PHARMACEUTICAL LABORATORIES, LTD.
By:/s/William R. Hurd
-------------------------------------
Title: President and COO
-------------------------------
SUN PHARMACEUTICAL INDUSTRIES, LTD.
By:/s/Sudhir Valia
-------------------------------------
Title: Full Time Director
-------------------------------
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<PAGE> 1
EXHIBIT 10.61
PRODUCTS AGREEMENT
BY AND BETWEEN
CARACO PHARMACEUTICAL LABORATORIES, LTD.
and
SUN PHARMACEUTICAL INDUSTRIES, LTD.
dated as of
April 23, 1997
<PAGE> 2
TABLE OF CONTENTS
1. SALE OF PRODUCTS BY SUN TO CARACO
1.1 OBLIGATION TO SELL PRODUCTS
1.2 TIMING OF SALES
1.3 SELECTION OF THE PRODUCTS
1.4 CONTINUING RIGHTS OF SUN
2. OBLIGATIONS OF CARACO WITH RESPECT TO PRODUCTS
2.1 DELIVERY OF PROTOCOL
2.2 CONDUCT OF TESTS AND STUDIES
2.3 PREPARATION AND SUBMISSION OF ANDA'S.
2.4 SUN'S RIGHT TO APPROVE COMMUNICATIONS
2.5 MANUFACTURE OF PRODUCTS
2.6 MARKETING OF PRODUCTS
2.7 NO ACTIVITIES OUTSIDE OF THE UNITED STATES
2.8 NO ASSIGNMENT OF PRODUCTS; SHARING OF INFORMATION
3. CONSIDERATION FOR PRODUCTS.
3.1 RECEIPT OF SHARES
3.2 ISSUANCE AND DELIVERY OF SHARES
4. OPTION TO SELL MORE PRODUCTS
5. ADJUSTMENT OF COMMON SHARES ISSUABLE
5.1 RECLASSIFICATION, CONSOLIDATION OR MERGER
5.2 SUBDIVISION OR COMBINATION OF SHARES
5.3 CERTAIN DIVIDENDS AND DISTRIBUTIONS
<PAGE> 3
6. ADDITIONAL COVENANTS OF CARACO.
6.1 CHARTER AMENDMENT.
6.2 LISTING
7. REPRESENTATIONS AND WARRANTIES.
8. CONDITIONS TO OBLIGATIONS OF SUN
8.1 NO DEFAULTS
8.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
8.3 NO LITIGATION.
9. CONDITIONS TO OBLIGATIONS OF CARACO.
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
9.2 NO LITIGATION
10. TERMINATION AND REMEDIES FOR BREACHES OF THIS AGREEMENT
10.2 BREACH OF OBLIGATIONS
10.3 FAILURE OF CONDITIONS
10.4 EFFECT OF REVERSION.
10.5 INDEMNIFICATION.
10.6 ARBITRATION
11. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS
12. NO THIRD-PARTY BENEFICIARIES
13. FURTHER ASSURANCES
14. ENTIRE AGREEMENT
15. BINDING EFFECT; ASSIGNMENT
<PAGE> 4
16. COUNTERPARTS
17. HEADINGS
18. NOTICES
19. GOVERNING LAW
20. AMENDMENTS AND WAIVERS
21. SEVERABILITY
22. EXPENSES
23. CONSTRUCTION
<PAGE> 5
PRODUCTS AGREEMENT
THIS AGREEMENT, made this ____ day of April, 1997, by and between CARACO
PHARMACEUTICAL LABORATORIES, LTD., a Michigan corporation ("Caraco"), and SUN
PHARMACEUTICAL INDUSTRIES, LTD., a corporation organized under the laws of India
("Sun").
W I T N E S S E T H:
WHEREAS, Caraco is engaged in the manufacture and distribution of generic
pharmaceuticals.
WHEREAS, Caraco owns and operates a state-of-the-art manufacturing facility in
Detroit, Michigan (the "Facility") for the production of pharmaceutical
products.
WHEREAS, Caraco has a limited product line which it wishes to expand.
WHEREAS, Sun has extensive knowledge relating to the formulation, manufacture
and sale of generic pharmaceutical products in India which knowledge it can
deliver to Caraco.R
WHEREAS, Sun wishes to benefit from the manufacture and sale by Caraco of
generic pharmaceutical products in the United States.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows.
1. SALE OF PRODUCTS BY SUN TO CARACO.
1.1 Obligation to Sell Products. During the period of sixty months from
the date hereof (the "Closing Date"), Sun, or its affiliates, at its own
expense, shall, pursuant to the terms and conditions set forth herein, sell to
Caraco the right to develop, make, sell, use, license and otherwise exploit in
the United States the formulations, technology, manufacturing process, know-how,
stability data, and other relevant information with respect to 25 generic
pharmaceutical products (the "Products"); provided, however, that any Product
which is a DESI Product (as defined below) shall count as only 1/3 of a Product.
For the purposes of this Agreement "DESI Product" shall mean Drug Efficiency
Study Implementation Products, which can be marketed based on past marketing of
an identical product that is not the subject of an approved drug application and
thus does not require an ANDA (as defined below) to be marketed in compliance
with the Federal Food, Drug and Cosmetics Act, as amended, and the regulations
thereunder.
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<PAGE> 6
1.2 Timing of Sales. So long as Caraco is promptly performing its
obligations pursuant hereto, no less then five (5) Products shall be sold to
Caraco by Sun or its affiliates every twelve (12) months commencing on the
Closing Date; provided, however, that no determination of a failure to promptly
perform may be made until the first anniversary of the Closing Date.
1.3 Selection of the Products. The Products shall be selected by the
mutual agreement of Sun and Caraco's Executive Committee from time to time. It
is expressly agreed and acknowledged that the parties have not, as of the date
hereof, agreed on what the Products shall be, and Sun shall not, as of the date
hereof, have any obligation to deliver any specific product, but solely to
deliver 25 Products, which are to be hereafter identified as set forth in this
Section 1.3. In connection with the sale of a Product, Sun will provide to
Caraco the requisite analytical procedures (which, without limitation, include
stability indicia and cleaning methods), stability data, a development report
and development data customarily prepared by Sun.
1.4 Continuing Rights of Sun. Notwithstanding the sale of any Product
hereunder by Sun to Caraco, nothing herein shall in any way limit the right of
Sun to develop, produce, market or take any other action with respect to any
Product outside of the United States, and Sun shall continue to have the
absolute, unfettered and exclusive right to do any of the foregoing, without the
payment by Sun of any royalty, premium or other payment to Caraco in connection
therewith.
2. OBLIGATIONS OF CARACO WITH RESPECT TO PRODUCTS.
2.1 Delivery of Protocol. To the extent that the United States Food and
Drug Administration ("FDA") has a required protocol for the studies designed to
demonstrate the bioequivalency of a Product, other than a DESI Product (an "FDA
Protocol"), then within sixty days of the delivery of such Product pursuant to
Section 1 hereof, Caraco shall deliver, in writing, to Sun, a proposed protocol,
which is believed in good faith by Caraco to be acceptable to the FDA (or, if
applicable, a waiver of evidence of in vivo bioavailability). To the extent
that no FDA Protocol exists with respect to a Product (other than a DESI
Product) delivered pursuant to Section 1 hereof, Caraco will, in consultation
with the FDA and Sun, develop such a protocol within 150 days of delivery of
such Product by Sun; and will promptly deliver such protocol to Sun after it has
been developed.
2.2 Conduct of Tests and Studies. Unless the parties agree, based upon
the advice of FDA counsel, that a Product is a DESI Product and therefor no ANDA
is required with respect to such Product, Caraco shall conduct, at its own
expense, all tests, including a bioequivalency study (or studies) and/or pilot
studies designed to provide clinical information to assist in the development of
clinical bioequivalence protocols and bioanalytic methods, and any clinical
trials which Sun and/or Caraco deem to be reasonably necessary to enable Caraco
to prepare and to file with the FDA an application for an Abbreviated New Drug
Application
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<PAGE> 7
("ANDA") for each Product. Caraco shall select suitable clinical research
organizations to conduct any such studies and trials.
(a) Caraco shall, at its sole expense, produce quantities of any
Product as necessary for use in such studies and trials. Such Products shall be
produced in accordance with those current good manufacturing regulations
established in 21 CFR Parts 210 and 211, as such sections, from time to time,
may be amended, supplemented, or any successor provisions ("Current Good
Manufacturing Practices").
(b) Caraco shall, in connection with its clinical studies, develop
manufacturing procedures, batch records, packaging and labeling instructions,
release specifications, and quality assurance procedures and put the Procedures
into an FDA accepted format.
(c) Sun shall have the right, but not the obligation, to monitor all
bioequivalency studies and clinical trials, and discuss the methodologies and
results of such studies and clinical trials with the persons responsible for the
design and conduct of such studies and/or trial by or on behalf of Caraco. As
requested by Sun, Caraco shall submit relevant production records, including the
product formulation, master batch record, specifications, analytical results and
related supporting documentation. Sun reserves the right to use, outside the
United States, as and when it may elect to do so, any information, data, studies
(except bio-equivalency studies of Caraco) and formulations which it may be
furnished hereunder, without any royalty, premium or other payment to Caraco.
(d) If Sun wishes to sell the products manufactured by Caraco outside
the United States, Sun has to reimburse Caraco's direct raw material cost, for
the product and 60% of raw material cost as labor and overhead charges and 20%
of raw material cost as Profit.
2.3 Preparation and Submission of ANDA's. Caraco shall complete and
submit the ANDA for each Product to the FDA as promptly as commercially
practicable after the mutual selection of such Product, shall promptly respond
to inquiries by the FDA in connection with the Product, and shall monitor and
support the submission. Caraco shall pay all expenses in connection with such
submission and monitoring for each submitted Product, including the filing fee
and all legal and consulting fees and expenses. In any ANDA Caraco shall:
(a) identify itself as the manufacturer, and identify the packagers,
labelers, and contract laboratories whose components or services are used in
production of the Product;
(b) submit methods, process and cleaning validations;
(c) submit a signed certificate evidencing its compliance with Current
Good Manufacturing Practices;
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<PAGE> 8
(d) submit executed master formula and batch production and control
records;
(e) adequately describe the precautions taken to ensure proper
labeling;
(f) submit specifications and test methods for testing the Product
during the manufacturing process;
(g) submit the appropriate packaging information;
(h) submit the appropriate stability information; and
(I) submit such other information, documentation or other matters as
(1) required by applicable FDA rules or regulations, (2) reasonably determined
by Sun or Caraco to be necessary or advisable to permit the expeditious approval
of such ANDA or (3) requested by the FDA.
2.4 Sun's Right to Approve Communications. At least five (5) business
days prior to the intended submission to the FDA of any ANDA and/or other
substantive correspondence, documentation or other information regarding a
Product (a "Communication") Caraco shall submit copies of such Communication to
Sun for its review and approval and to inform Sun of the intended date of
submission of the same to the FDA. Prior to the date of the intended submission,
Sun shall have the right to comment on such Communications and to suggest
changes thereto, and the parties shall negotiate in good faith with respect to
the inclusion of the Communications of any such requested changes. Anything
herein to the contrary notwithstand ing, Caraco shall not submit any
Communications to the FDA without the prior approval of Sun; provided, however,
that if Caraco believes, in its reasonable judgment, that seeking Sun's prior
consent will cause undue delay or otherwise be impracticable under the
circumstances, no such prior consent shall be required so long as Caraco
promptly provides Sun with such Communication and all related correspondences
and/or notes of conversations. Within three (3) business days of receipt from
the FDA or any other party of any Communications regarding ANDA matters or
otherwise related to the Products, Caraco will provide Sun with copies of such
Communications.
2.5 Manufacture of Products. Caraco shall manufacture each Product in
accordance with Current Good Manufacturing Practices, whether such Products
are being manufactured in connection with the submission and seeking of approval
of an ANDA or for sale to the public following approval of an ANDA with respect
thereto.
2.6 Marketing of Products. Caraco shall use its best efforts (subject to
any limitations imposed as a result of its financial condition) to maximize the
sale of each Product in the United States. It shall provide marketing personnel
and such other capabilities as reasonably appropriate to maximize the sale of
each Product in the United States using its best efforts consistent with the
stage of development of such Product. To this extent, Caraco shall not, at any
time after
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<PAGE> 9
delivery of any Product, enter into any agreement or otherwise obligate itself
to restrict or limit its manufacture of such Product.
2.7 No Activities Outside of the United States. Caraco shall not make,
use or sell, or grant rights to others to make, use or sell a Product outside
the United States without the consent of Sun, which may be granted or withheld
in its sole discretion.
2.8 No Assignment of Products; Sharing of Information. Without the
written consent of Sun (which may be granted or withheld in its sole
discretion), Caraco shall not (a) grant rights to any third person, to make, use
or sell a Product, whether by assignment, license, sale or other transfer (b)
sell, assign, or otherwise permit access to or use of the data supporting any
ANDA for a Product, or to the ANDA's themselves, to any person or entity other
than Sun, the FDA and any other governmental agency or body with jurisdiction.
3. CONSIDERATION FOR PRODUCTS.
3.1 Receipt of Shares. The consideration for each Product (other than a
DESI Product) delivered shall be 544,000 (as such number may be adjusted from
time to time pursuant to Section 5 hereof) shares of common stock, no par value,
of Caraco ("Common Shares"). The consideration for each DESI Product delivered
shall be 181,333 (as such number may be adjusted from time to time pursuant to
Section 5 hereof) Common Shares. The consideration will become due with respect
to each Product (i) at such time as such Product passes the applicable
bioequivalency study or studies, or, (ii) if Caraco and Sun agree that no such
studies or tests are required for the submission of an ANDA with respect to such
Product, then upon the FDA's granting approval of an ANDA with respect to such
Product, or (iii) if the parties agree, based upon the advice of FDA counsel
that such Product is a DESI Product and thus no ANDA is required with respect to
a Product, upon the agreement by Caraco's Executive Committee and Sun that such
Product will be one of the Products delivered hereunder and upon commencement of
marketing such Product by Caraco (each of (i) through (iii) being referred to
herein as a "Target Date").
3.2 Issuance and Delivery of Shares. The Common Shares issuable with
respect to any Product shall be issued and delivered by Caraco to Sun, in Sun's
name or that of a nominee which request may be delivered by Sun to Caraco at any
time after the Target Date with respect to such Product. Within two business
days of Caraco's receipt of such notice, it shall send to its transfer agent an
instruction directing such transfer agent to issue and deliver such shares to
Sun or its nominee and shall cause such transfer agent to deliver such shares
within two business days after its receipt of such notice. The Common Shares
issued and delivered by Caraco to Sun pursuant hereto, when issued shall be duly
authorized and validly issued, fully paid and non- assessable and not subject to
any preemptive or similar rights. Such Common Shares will be delivered by
Caraco and acquired by Sun free and clear of any lien, claim, charge,
restriction
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<PAGE> 10
or other encumbrance, and shall rank pari passu with the then existing issued
and outstanding Common Shares.
4. OPTION TO SELL MORE PRODUCTS. In addition, to the extent, and at any time,
that Hexal Pharma GmbH & Co (or any of its nominees, designees or affiliates)
exercises either or both of its Product Options (as such term is defined
pursuant to the Agreement dated as of October 1, 1993 by and between Caraco,
Hexal Pharma GmbH & Co., KG of Holzkirchen and the other parties thereto) Sun
shall have the right, but not the obligation, to deliver an additional Product
and receive 544,000 additional Common Shares (subject to adjustment as set forth
in Section 5 hereof) for each 544,000 Common Shares (subject to adjustment as
set forth in Section 5 hereof), or part thereof, issued upon exercise of the
Product Options; provided that the number of Shares, in the aggregate, issued to
Sun pursuant to this Section, shall in no event, at any time, exceed the number
of Common Shares, in the aggregate, issued upon exercise of the Product Options
by more than 543,990 (subject to adjustment as set forth in Section 5 hereof).
For example, to the extent that Hexal exercises Product Options for 250,000
shares, Sun shall have the right, but not the obligation, to sell one additional
Product to Caraco and receive therefor a total of 544,000; Sun will then not
have the right, pursuant to this sentence, to sell additional Products (beyond
the initial twenty-five and any additional Products sold to Caraco pursuant to
this sentence) to Caraco for additional Shares until Hexal has exercised Product
Options for at least an additional 294,001 shares of common stock (i.e., a
number, which when added to the Shares previously delivered pursuant to this
sentence exceeds 544,000 or the next higher multiple of 544,000). Products will
be sold pursuant to this Section, and Common Shares acquired pursuant hereto, in
accordance with the terms and conditions of this Agreement, in its entirety.
5. ADJUSTMENT OF COMMON SHARES ISSUABLE. The number of Common Shares issuable
following any Target Date (and each of the share amounts set forth in Section 4
hereof), shall be adjusted from time to time upon the happening of certain
events, as follows:
5.1 Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding Common Shares (other than a change in
par value, or from par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination), or in case of any consolidation
or merger of Caraco with or into another corporation (other than a merger with
another corporation in which Caraco is the surviving corporation and which does
not result in any reclassification or change -- other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination -- of outstanding Common Shares) the
rights of Sun to receive Common Shares pursuant to Section 3 or 4 hereof shall
be adjusted in the manner described below:
(a) In the event that Caraco is the surviving corporation, the
consideration for Products shall, without payment of additional consideration
therefor, be deemed modified so as to provide that in lieu of each Common Share
theretofore issuable, the kind and amount of shares of Stock, other securities,
money and property receivable upon such reclassification,
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<PAGE> 11
change, consolidation or merger by the holder of each Common Share issuable had
such Common Shares been actually issued immediately prior to such
reclassification, change, consolidation or merger.
(b) In the event that Caraco is not the surviving corporation, in lieu
of the Common Shares issuable hereunder, the surviving corporation shall issue
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change, consolidation or merger by the
holder of Common Shares had they been issued immediately prior to such
reclassification, change, consolidation or merger.
5.2 Subdivision or Combination of Shares. If Caraco at any time after the
date hereof but prior to a Target Date shall subdivide or combine its Common
Shares, all share numbers in Sections 3 and 4 hereof shall be proportionately
increased, in case of subdivision of shares, as of the effective date of such
subdivision, and proportionately reduced in case of a combination, as of the
date of such combination.
5.3 Certain Dividends and Distributions. If Caraco, at any time after the
date hereof but prior to a Target Date, shall pay a dividend payable in, or make
any other distribution of Common Shares, all share numbers in Sections 3 and 4
hereof shall be adjusted, as of the date the Corporation shall take a record of
the Holders of its Common for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as of the date of such payment or
other distribution), to that number determined by multiplying such number by a
fraction (1) the numerator of which shall be the total number Common Shares
outstanding immediately following such dividend or distribution (plus in the
event that Caraco paid cash for fractional shares, the number of additional
shares which would have been outstanding had Caraco issued fractional shares in
connection with said dividend, split-up or distribution) and (2) the denominator
of which shall be the total number of Common Shares outstanding immediately
prior to such dividend or distribution.
6. ADDITIONAL COVENANTS OF CARACO.
6.1 Charter Amendment. Caraco shall, on or before June 30, 1997, take all
actions necessary to cause its Articles of Incorporation to be amended to
authorize a total of 30,000,000 Common Shares.
6.2 Listing. In the event that the Common Shares shall be listed for
trading on any national securities exchange, or admitted for trading on the
NASDAQ National Market or the NASDAQ Small Cap Market, such listing or admission
(to the extent permitted by the rules of such exchange or NASDAQ market) shall
include all Common Shares issued and/or issuable hereunder.
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<PAGE> 12
7. REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in Sections 3 and 4 of that certain Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated as of April ___, 1997 by and between Caraco and Sun,
are hereby incorporated by reference herein, in their entirety. Upon delivery
of any Product, Sun will be deemed to have represented and warranted to Caraco
that it has the full and unrestricted right to deliver such Product to Caraco.
All representations, warranties, covenants and agreements of Caraco contained in
this Agreement shall survive the Closing Date, the sale of any Products and the
delivery of any Common Shares and continue in full force and effect thereafter
and will not be affected by any examination made by on behalf of Sun, the
knowledge of any of its officers, directors, stockholders, employees or agents,
or the acceptance of any certificate or opinion. All representations,
warranties, covenants and agreements of Sun contained in this Agreement shall
survive the Closing Date, the sale of any Products and the delivery of any
Common Shares and continue in full force and effect thereafter and will not be
affected by any examination made by on behalf of Caraco, the knowledge of its
officers, directors, stockholders, employees or agents or the acceptance of any
certificate or opinion.
8. CONDITIONS TO OBLIGATIONS OF SUN. The obligations of Sun are subject to
the conditions that, at all times during the term of this Agreement
8.1 No Defaults. All covenants, agreements and conditions required by
this Agreement and all other agreement to which Sun and Caraco are parties
(including, without limitation, the Stock Purchase Agreement and the Voting
Agreement and the Registration Rights Agreement, as defined therein) to be
complied with or performed by Caraco, have been performed and duly complied with
in all material respects.
8.2 Accuracy of Representations and Warranties. The representations and
warranties made by Caraco herein, or in any certificate delivered pursuant
hereto, shall be correct in all material respects, at the time when made, and in
the case of the representations and warranties set forth in Sections 4.1, 4.3,
4.5, 4.7, 4.10, 4.11, 4.14 and 4.20 of the Stock Purchase Agreement and
incorporated herein by reference during the term of this Agreement with the same
force and effect as if such representations and warranties had been made on, and
with respect to any such date.
8.3 No Litigation. There shall not be any pending or threatened
injunction, judgment, order, decree or ruling by any court or governmental
agency which presents a substantial risk to the restraint or prohibition of the
transactions contemplated by this Agreement or the obtaining of material damages
or other relief in connection therewith.
9. CONDITIONS TO OBLIGATIONS OF CARACO. The obligations of Caraco are subject
to the conditions that, at all times during the term of this Agreement
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<PAGE> 13
9.1 Accuracy of Representations and Warranties. The representations and
warranties made by Sun herein, or in any certificate delivered pursuant hereto,
shall be correct in all material respects, at the time when made.
9.2 No Litigation. There shall not be any pending or threatened
injunction, judgment, order, decree or ruling by any court or governmental
agency which presents a substantial risk to the restraint or prohibition of the
transactions contemplated by this Agreement or the obtaining of material damages
or other relief in connection therewith.
10. TERMINATION AND REMEDIES FOR BREACHES OF THIS AGREEMENT.
10.1 Breach of Obligations. In the event Caraco materially fails to
perform its material obligations with respect to a Product, and fails to cure
such failure within 30 days of notice of such failure from Sun (or if a cure is
not reasonably possible within 30 days, such longer period as is necessary to
cure such failure so long as at all relevant times after such 30 days Caraco is
using its best efforts to effect such cure), Sun shall have, in addition to any
other rights it may have hereunder or under law, the right to qualify an
alternative company for the manufacture and sale of the Product in the United
States and the right to submit an ANDA for the manufacture and sale of a Product
at an alternative company in the United States. In the event Caraco materially
fails to perform any of its material obligations with respect to a Product, Sun
may elect to have the rights sold, to Caraco in such Product revert back to Sun.
However, in such case Sun will have no obligation to return shares issued for a
Product(s) to Caraco.
10.2 Failure of Conditions. In the event, at any time, that any one or
more of the conditions set forth in Section 7 hereof are not satisfied and such
conditions are material, Sun shall have the right to suspend its and such
condition is material in performance of its obligations hereunder; and if such
condition or conditions remains unsatisfied for 30 days after notice to Caraco
of such failure from Sun (or if a cure is not reasonably possible within 30
days, such longer period as is necessary to cure such failure so long as at all
relevant times after such 30 days Caraco is using its best efforts to effect
such cure), Sun shall have, in addition to any other rights it may have
hereunder or at law, the right to terminate any further obligations it has
hereunder by delivering written notice to Caraco. and upon such termination, all
Products transferred to Caraco shall revert back to Sun, other than those
Products for which Sun has been issued Common Shares pursuant to Section 3
hereof. However, in such a case Sun will have no obligation to return shares for
a Product(s) to Caraco.
10.3 Effect of Reversion. Upon reversion of any Products to Sun pursuant
to this Section 10, Caraco shall retain no rights to develop, produce, market or
otherwise exploit or deal in any manner the Product in the United States or
elsewhere, and Caraco shall immediately return to Sun the original versions and
all copies of all information, data, studies, know-how, formulae, designs,
drawings, software and other documents related to such Product, except for
bio-equivalency studies.
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10.4 Indemnification. Caraco shall indemnify and hold harmless Sun and
its Affiliates, directors, officers, advisors, agents and employees (the
"Indemnified Parties"), to the fullest extent lawful, from and against any and
all losses, damages, claims, liabilities, actions and expenses (including,
without limitation, costs of investigation, preparing or defending any such
claim or action and reasonable legal fees and expenses (collectively "Losses")
arising out or in connection with (i) any third party claims asserted against an
Indemnified Party arising out of or in connection with the transactions
contemplated hereby or (ii) the material breach of any warranty, representation,
covenant or agreement of the Caraco contained in this Agreement or any of the
agreements contemplated hereby (as to which breach Caraco has received notice
and not less than 30 days to cure), and including, without limitation, any such
Losses arising out of transactions entered into or events occurring prior to the
Closing. The term "Losses" as used in this Section 10.5 is not limited to
matters asserted by third parties against an Indemnified Party, but includes
Losses incurred or sustained by any Indemnified Party in the absence of third
party claims. Notwithstanding the above, in no event shall Caraco be liable for
any losses in excess of the amount of money actually contributed and received by
Caraco from Sun pursuant to Section 2 of Stock Purchase Agreement of even date
between Caraco and Sun, and up to maximum of an additional amount of US$ 1
Million.
10.5 Arbitration. Any dispute between the parties regarding any provision
of this Agreement shall be resolved by binding arbitration before the London
Court of International Arbitration according to its rules of commercial
arbitration. Judgment upon the award of the arbitrators may be entered by any
court of competent jurisdiction.
11. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.
Unless required by law (in which case the Caraco hereby agrees to give Sun
a reasonable prior opportunity to review and comment upon any proposed
disclosure), after the date hereof through and after the Closing Date, Caraco
shall not issue any press release or make any public announcement relating to
the subject matter of this Agreement or the transactions contemplated hereby
without the prior written approval of Sun.
12. NO THIRD-PARTY BENEFICIARIES.
This Agreement shall not confer any rights or remedies upon any person
other than the parties and their respective officers, directors, heirs,
executors, administrators, successors, affiliates and associates and permitted
assigns.
13. FURTHER ASSURANCES.
The parties hereto hereby agree to execute and deliver to one another such
further instruments and other documentation as may be requested by any other
party hereto at any time and from time to time to carry out the terms of this
Agreement.
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14. ENTIRE AGREEMENT.
This Agreement and the documents executed and delivered pursuant hereto
constitute the entire agreement between the parties with respect to the subject
matter contained herein, and supersede all prior and contemporaneous oral and
written communications and agreements with respect thereto.
15. BINDING EFFECT; ASSIGNMENT.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors and
assigns affiliates and associates. No party has the right to assign any of its
rights or obligations hereunder without the prior written consent of the other
parties hereto, except that Sun may assign this Agreement and any of the
provisions hereunder to any Affiliate of Sun without the consent of Caraco. In
addition, Sun may assign its rights (but not obligations) under this Agreement
for collateral or other security purposes to any lenders providing bonafide
financing to Sun without the consent of Caraco.
16. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instruments.
17. HEADINGS.
Headings of sections shall be deemed to be included for purposes of
convenience only and shall not affect the interpretation of this Agreement.
18. NOTICES.
Any notices or consents required or permitted by this Agreement shall be in
writing and shall be deemed delivered if sent by certified mail, postage
prepaid, return receipt requested, or overnight delivery service (receipt
confirmed), or facsimile (receipt confirmed), as follows, unless such address is
changed by written notice hereunder:
If to Caraco: Caraco Pharmaceutical Laboratories, Ltd.
1150 Elijah McCoy Drive
Detroit, Michigan 48202
Attention: President
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with a copy to:
Fred B. Green, Esq.
Seyburn, Kahn, Ginn, Bess, Deitch and Serlin
2000 Town Center
Suite 1500
Southfield, Michigan 48075-1195
If to Sun: Sun Pharmaceutical Industries Limited
Synergy House, Subhanpura
Gorwa Road, Baroda, 390-007 India
Attention: Mr. Dilip Shanghvi
and
Sun Pharmaceutical Industries Limited
3, Narayan Building, 23, L.N. Road
Dadar (E), Mumbai - 400 014 India
Attention: Mr. Sudhir Valia
with a copy to:
Michael D. Rosenthal, Esq.
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Any notice delivered hereunder shall be deemed given when actually
received.
19. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Michigan.
20. AMENDMENTS AND WAIVERS.
This Agreement may be amended and any provision hereof waived only in a
writing signed by the party against whom an amendment or waiver is sought to be
enforced. The parties hereto shall have the right at all times to enforce the
provisions of this Agreement in strict accordance with the terms hereof,
notwithstanding any conduct or custom on the part of such party in refraining
from so doing at any time or times. The failure of any party at any time to
enforce its rights under such provisions strictly in accordance with the same
shall not be
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<PAGE> 17
construed as having created a custom in any way or manner contrary to specific
provisions of this Agreement or as having in any way or manner modified or
waived the same.
21. SEVERABILITY.
If any provision of this Agreement shall be held invalid under any
applicable law, such invalidity shall not affect any other provision of this
Agreement that can be given effect without the invalid provision, and, to this
end, the provisions hereof are severable.
22. EXPENSES.
Except as otherwise expressly provided in this Agreement, the parties will
bear their respective costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
23. CONSTRUCTION.
The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state or local statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context requires.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
themselves or by their duly authorized representatives, under seal, the day and
year first above written.
CARACO PHARMACEUTICAL LABORATORIES, LTD.
By: /s/William R. Hurd
-------------------------------------
Title: President
-------------------------------
SUN PHARMACEUTICAL INDUSTRIES, LTD.
By:/s/Sudhir Valia
-------------------------------------
Title: Full Time Director
-------------------------------
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EXHIBIT 10.62
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of April ___, 1997 ("Agreement"), by and
among Caraco Pharmaceutical Laboratories, Ltd. (the "Company"), and Sun
Pharmaceutical Industries Ltd. (the "Investor").
RECITALS
(A) Pursuant to that certain Stock Purchase Agreements by and between the
Company and the Investor, dated as of April ____, 1997 (collectively, the "Stock
Purchase Agreements"), the Company agreed to sell to the Investor an aggregate
of 5,300,000 of the Company's Common Shares.
(B) Pursuant to that certain Products Agreement (the "Products Agreement") by
and between the Company and the Investor of even date herewith, the Company has
agreed to sell to the Investor certain additional shares, from time to time, in
consideration for certain rights with respect to generic drug products.
(C) As a condition to the consummation of the transactions contemplated by the
Stock Purchase Agreement and the Products Agreement, the Company and the
Investor have entered into this Agreement to provide certain registration rights
to the Investor.
AGREEMENTS
In consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement:
"Affiliate" shall mean any entity controlling, controlled by or under
common control with another entity. For the purposes of this definition,
"control" shall have the meaning presently specified for that word in Rule 405
promulgated by the Securities and Exchange Commission under the Securities Act.
"Common" means the Company's Common Shares, with no par value per share,
and any Stock into which such stock may hereafter be changed.
"Company" shall have the meaning set forth in the Recitals hereto.
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<PAGE> 2
"Holders" means the Persons who shall, from time to time, own of record
any Security. The term "Holder" shall mean any one of the Holders.
"Person" means an individual, a corporation, a partnership, a limited
liability Company, a trust, an unincorporated organization or a governmental
organization or any agency or political subdivision thereof.
"Products Agreement" shall have the meaning set forth in the Recitals
hereto.
"Property" shall mean any kind of interest in any kind of property or
assets, whether real, personal or mixed, or tangible or intangible.
"Prospectus" shall mean any prospectus which is a part of a Registration
Statement, together with all amendments or supplements thereto.
"Registrable Stock" shall mean at any time, the shares of the then
outstanding shares of Common issued by the Company pursuant to the Stock
Purchase Agreement or the Products Agreement, provided, however, that
Registrable Stock shall not be deemed to include any shares after such shares
have been registered under the Securities Act and sold pursuant to such
registration or any shares sold without registration under the Securities Act in
compliance with Rule 144, or pursuant to any other exemption from registration
under the Securities Act to a Person who is free to resell such shares without
registration or restriction under the Securities Act.
"Registration Statement" shall mean any registration statement filed
with the Securities and Exchange Commission in accordance with the Securities
Act, together with all amendments or supplements thereto.
"Securities" shall mean any debt or equity securities of the Company,
whether now or hereafter authorized, and any instrument convertible into or
exchangeable or exercisable for Securities or a Security. The term "Security"
shall mean any one of the Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended prior
to or after the date of this Agreement, or any federal statute or statutes which
shall be enacted to take the place of such Act, together with all rules and
regulations promulgated thereunder.
"Securities and Exchange Commission" shall mean the United States
Securities and Exchange Commission or any successor to the functions of such
agency.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended prior to or after the date of this Agreement, or any federal
statute or statutes which shall be
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enacted to take the place of such Act, together with all rules and regulations
promulgated thereunder.
"Seller" shall mean each Holder of Securities of the Company as to which
Securities the Company could be required to file a Registration Statement or
which could be registered under the Securities Act at the request of such Holder
pursuant to any of the provisions of this Agreement.
"Stock Purchase Agreements" shall have the meaning given such term in the
Recitals hereto.
2. Required Registrations.
(A) At any time here after upon the written request to register shares of
Registrable Stock having an aggregate fair market value of not less than
$500,000 (based upon the reported closing bid price of Common on the date for
which such price is reported last preceding the date of the request, or if there
is no such reported closing price, based upon a good faith estimate of fair
market value received from an investment banking firm selected by the requesting
Holders) under the Securities Act made by Holders of not less than a majority of
the then existing Shares of Registrable Stock, the Company will use its best
efforts to effect the registration of Registrable Stock under the Securities Act
and the registration or qualification thereof under all applicable state
securities or blue sky laws. A request pursuant to this Section 2(A) shall
state the intended method of disposition of the Registrable Stock sought to be
registered. Whenever the Company shall, pursuant to this Section 2(A), be
requested to effect the registration of any Registrable Stock under the
Securities Act, the Company shall promptly give written notice of such proposed
registration to all Holders of Registrable Stock, stating that such Holders have
the right to request that any or all of the Registrable Stock owned by them be
included in such registration. The Company shall include in such registration
all Registrable Stock with respect to which the Company receives written
requests from the Holders thereof for inclusion therein (stating the intended
method of disposition of such Stock); and thereupon the Company will, as
expeditiously as possible, use its best efforts to effect the registration,
under the Securities Act, of such Registrable Stock which the Company has been
requested to register for disposition by such Holders in accordance with the
intended method of disposition described in the requests of such Holders, all to
the extent requisite to permit such sale or other disposition by such Holders of
the Registrable Stock so registered. The Holders of at least a majority of the
Registrable Stock included in a Registration Statement filed pursuant to this
Section 2 shall have the right to select the investment banker or bankers who
shall serve as the manager and/or co-managers for the offering of Securities
covered by such Registration Statement.
(B) From and after the date, if any, that the Company is entitled to
register Common for sale by the Holders thereof under the Securities Act on Form
S-3 or any form hereafter adopted by the Securities and Exchange Commission to
take the place of Form S-3, the Holder
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or Holders of Registrable Stock in existence at such time having a fair market
value of at least $500,000 (based upon the reported closing bid price of the
Common on the date for which such price is reported last preceding the date of
the request, or if no such reported closing price, based upon a good faith
estimate of fair value received from an investment banking firm selected by the
requesting Holders) shall be entitled to require the Company to register
Registrable Stock pursuant to the provisions of Section 2(A) hereof for an
unlimited number of times, and the Company shall comply with each such request
in accordance with the terms of Section 2(A) hereof.
3. Incidental Registration. If the Company at any time proposes or is
required to register any of its Securities under the Securities Act or any
applicable state securities or blue sky laws on a form which permits inclusion
of the Registrable Stock as appropriate, of its intention so to do. Upon the
written request of any such Holder given within 20 days after receipt of any
such notice, the Company will use its best efforts to cause all such Stock which
such Holders shall have requested be registered to be registered under the
Securities Act and any applicable state securities or blue sky laws all to the
extent requisite to permit the sale or other disposition by such Holders of the
Registrable Stock so registered. No registrations of Registrable Stock under
this Section 3 shall relieve the Company of its obligation to effect
registrations under Section 2 hereof, or shall constitute a registration request
by any Holder of Registrable Stock under Section 2.
4. Registration Procedures. Whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any Stock under the Securities Act, the Company will, as expeditiously as
possible:
(A) prepare and file with the Securities and Exchange Commission a
Registration Statement with respect to such Stock and use its best efforts to
cause such Registration Statement to become and remain effective for a period of
not less than nine months or more than one year (or such shorter period as
actually required to sell all shares registered thereunder pursuant thereto),
provided that before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, the Company will furnish to counsel for the
Holders of Stock included in such Registration Statement copies of all such
documents proposed to be filed, which documents will be subject to the review of
such counsel;
(B) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for a period of not less than nine months or more than one
year (or such shorter period as actually required to sell all shares registered
thereunder pursuant thereto) and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all Securities covered by
such Registration Statement during such period in accordance with the intended
method or methods of disposition by the Sellers thereof set forth in such
Registration Statement;
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<PAGE> 5
(C) furnish to each Seller such number of copies of such Registration
Statement, each amendment and supplement thereto, the Prospectus included in the
Registration Statement (including each preliminary Prospectus), and such other
documents, as such Seller may reasonably request in order to facilitate the
public sale or other disposition of the Securities owned by such Seller;
(D) use every reasonable effort to register or qualify all the Securities
covered by such Registration Statement under such other securities or blue sky
laws of such jurisdictions as each Seller shall reasonably request, and do any
and all other acts and things which may be necessary under such securities or
blue sky laws to enable such Seller to consummate the public sale or other
disposition in such jurisdiction of the Securities owned by such Seller covered
by such Registration Statement; provided, however, that the Company shall not be
required to (i) qualify to do business as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction;
(E) notify each Seller at any time when a Prospectus relating to the
Securities of such Seller covered by such Registration Statement is required to
be delivered under the Securities Act, of the happening of any event as a result
of which the Prospectus included in such Registration Statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and at the request of any such Seller,
prepare a supplement or amendment to such Prospectus so that, as thereafter
delivered to the purchasers of the Securities covered by such Registration
Statement, such Prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(F) cause all such Securities covered by such Registration Statement to
be listed on each securities exchange on which Securities of the same class are
then listed;
(G) provide a transfer agent and registrar for Common not later than the
effective date of such Registration Statement;
(H) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the Holders of
at least a majority of the Stock included in such Registration Statement
pursuant to the provisions of this Agreement or underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Securities
(including, without limitation, effecting a stock split or a combination of
shares);
(I) make available for inspection by any Seller, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by any such Seller who is the
Holder of at least 10% of the Stock included in such registration pursuant to
the provisions of this Agreement or underwriter, all financial and other
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records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such Seller, underwriter, attorney, accountant or
agent in connection with such Registration Statement; and
(J) obtain a cold comfort letter from the Company's independent public
accountants and/or a legal opinion letter from the Company's counsel in
customary form and covering such matters of the type customarily covered by cold
comfort letters or legal opinion letters, as the case may be, as the
underwriters or the Holders of at least a majority of the Stock included in such
Registration Statement pursuant to the provisions of this Agreement reasonably
request.
5. Expenses. To the fullest extent allocable under applicable state
securities and blue sky laws, all expenses incurred in effecting the first four
registrations provided for in Section 2(A) hereof, and in effecting all of the
registrations provided for in Section 2(C) and Section 3 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, fees and disbursements of one law
firm serving as counsel for the Sellers (who shall be selected by Sellers
holding at least a majority of the Stock being offered), underwriting expenses
other than underwriting discounts and commissions, expenses of any audits
incident to or required by any such registration and expenses of complying with
the securities or blue sky laws of any jurisdictions pursuant to Subsection (D)
of Section 4 hereof, shall be borne and paid by the Company. In addition, any
such expenses in excess of $50,000 incurred in effecting registration under
Section 2(A) beyond the fourth shall be borne by the Company, with the first
$50,000 incurred in effecting each such additional registration being borne
ratably by Sellers participating in such registration.
6. Indemnification.
(A) In the event of any registration of any of its Securities under the
Securities Act pursuant to this Agreement, the Company, to the extent permitted
by law, shall indemnify and hold harmless the Seller of such Securities, each
underwriter (as defined in the Securities Act), each other Person who
participates in the offering of such Securities, and each other Person, if any,
who controls (within the meaning of the Securities Act) such Seller, underwriter
or participating Person, against any losses, claims, damages or liabilities,
joint or several, to which such Seller, underwriter, participating Person or
controlling Person may become subject under the Securities Act or any other
statute or at common law, in so far as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (1)
any alleged untrue statement of any material fact contained, on the effective
date thereof, in any Registration Statement under which such Securities were
registered under the Securities Act, any preliminary Prospectus or final
Prospectus contained therein, or any summary Prospectus issued in connection
with any Securities being registered, or any amendment or supplement thereto, or
(2) any alleged omission to state in any such document a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse each
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such Seller, or any such underwriter, participating Person or controlling Person
for any reasonable legal or other expenses reasonably incurred by such Seller,
underwriter, participating Person or controlling Person in connection with
investigating or defending any such loss, damage, liability or action subject to
the conditions that Caraco will only liable for the expenses of one counsel for
all of the Sellers ; provided, however, that the Company shall not be liable to
any Seller, or any such underwriter, participating Person, or controlling Person
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any alleged untrue statement or alleged omission
made in such Registration Statement, preliminary Prospectus, summary Prospectus,
Prospectus, or amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by such Seller,
specifically for use therein.
(B) Each Holder of Registrable Stock, by acceptance thereof, severally and
not jointly, indemnifies and holds harmless each other Holder of Registrable
Stock, the Company, its directors and officers, each underwriter (as defined in
the Securities Act), and each other Person, if any, who controls (within the
meaning of the Securities Act) the Company, any underwriter or any Holder,
against any losses, claims, damages, or liabilities, joint or several, to which
any such other Holder, the Company, any such director or officer, any such
underwriter, or any such Person may become subject under the Securities Act or
any other statute or at common law, in so far as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (1)
any alleged untrue statement of any material fact contained, on the effective
date thereof, in any Registration Statement under which Registrable Stock or
Common is registered under the Securities Act at the request of such Holder, any
preliminary Prospectus or final Prospectus contained therein, or any summary
Prospectus issued in connection with any such Securities being registered, or
any amendment or supplement thereto, or (2) any alleged omission to state in any
such document a material fact required to be stated therein or necessary to make
the statements therein not misleading, in either case to the extent, and only to
the extent, that such alleged untrue statement or alleged omission was made in
such Registration Statement, preliminary Prospectus, summary Prospectus,
Prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Holder specifically for use
therein, and then only to the extent that such alleged untrue statements or
alleged omissions by such Holder were not based on the authority of an expert as
to which such Holder had no reasonable ground to believe, and did not believe,
that the statements made on the authority of such expert were untrue or that
there was an omission to state a material fact. Notwithstanding the foregoing
provisions of this Subsection (B), no Holder shall be required to pay under such
provisions an amount in excess of the proceeds received by such Holder in
payment for the Securities sold by such Holder pursuant to the Registration
Statement.
(C) Indemnification similar to that specified in Subsections (A) and (B)
of this Section 6 shall be given by the Company and each Seller (with such
modifications as shall be appropriate) covered by any registration or other
qualification of Securities under any federal
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or state securities law or regulation other than the Securities Act with respect
to any such registration or other qualification effected pursuant to this
Agreement.
(D) Any Person which proposes to assert the right to be indemnified under
Subsections (A), (B) or (C) of this Section 6 shall, promptly after receipt of
notice of commencement of any action, suit or proceeding against such Person in
respect of which a claim is to be made against an indemnifying Person under such
Subsections (A), (B) or (C), notify each such indemnifying Person of the
commencement of such action, suit or proceeding, enclosing a copy of all papers
served. The indemnifying Person shall have the right to investigate and defend
any such loss, claim, damage, liability or action and to employ separate counsel
in any such action and to control the defense thereof. The Person claiming
indemnification shall have the right to employ separate counsel in any such
action and to control the defense thereof, but the fees and expenses of such
counsel shall not be at the expense of the Person against whom indemnification
is sought; provided, however, that notwithstanding the foregoing, in any case
when indemnification is sought against the Company and (i) the Person seeking
indemnification has been advised by counsel that its defenses may be different
from those of the Company, or (ii) the Company has not proceeded in a timely
manner to effect such defense, then the reasonable fees and expenses of counsel
for such Person shall be paid by the Company subject to the condition that
company will only be liable for the expenses of one counsel for all the persons
seeking indemnifications and the indemnified Person shall have the right to
control the defense of such action, suit or proceeding. In no event shall a
Person against whom indemnification is sought be obligated to indemnify any
Person for any settlement of any claim or action effected without the
indemnifying Person's consent.
(E) The indemnification provided for under this Section 6 will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of Securities.
7. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (i)
agrees to sell such Holder's Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements; provided, however, that no
Holder of Registrable Stock shall be required to make any representations or
warranties or to provide information in the Registration Statement relating to
such registration except, in either case, with respect to itself and its
intended method of disposition of Registrable Stock.
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8. Marketing Restrictions.
(A) If
(1) any Holder of Registrable Stock is entitled and wishes to
register any Registrable Stock in a registration made pursuant to Section 2
hereof, and
(2) the offering proposed to be made by the Holder or Holders for
whom such registration is to be made is to be an underwritten public
offering, and
(3) the Company or one or more Holders of Securities other than
Registrable Stock wishes to register Securities in such registration, and
(4) the managing underwriters of such public offering furnish a
written opinion that the total amount of Securities to be included in such
offering would exceed the maximum amount of Securities (as specified in
such opinion) which can be marketed at a price reasonably related to the
then current market value of such Securities and without otherwise
materially and adversely affecting such offering,
then the relative rights to participate in such offering of the Holders of
Registrable Stock, the Holders of other Securities having the right to include
such Securities in such registration, and the Company shall be in the following
order of priority:
First: The Holders of Registrable Stock shall be entitled to
participate in accordance with the number of shares of Registrable Stock
which each such Holder shall request to be registered, such participation
to be pro rata in accordance with the number of shares which each such
Holder shall request be registered if, pursuant to clause 4 of this
Subsection (A), the total amount of Securities to be included in the
offering will be less than the number of shares of Registrable Stock that
all of such Holders shall request be registered; and then
Second: The Company shall be entitled to participate; and then
Third: All Holders of other Securities having the right to include
such Securities in such registration shall be entitled to participate in
accordance with the relative priorities, if any, as shall exist among them;
and no Securities (issued or unissued) other than those registered and included
in the underwritten offering shall be offered for sale or other disposition by
the Company or any Holder of Registrable Stock in a transaction which would
require registration under the Securities Act until the expiration of 90 days
after the effective date of the Registration Statement filed pursuant to Section
2 hereof, or such earlier time consented to by the managing underwriters or by
Sun.
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(B) If
(1) any Holder of Registrable Stock entitled to do so requests
registration of Registrable Stock under Section 3 hereof, and
(2) the offering proposed to be made is to be an underwritten public
offering, and
(3) the managing underwriters of such public offering furnish a
written opinion that the total amount of Securities to be included in
such offering would exceed the maximum amount of Securities (as specified
in such opinion) which can be marketed at a price reasonably related to
the then current market value of such Securities and without materially
and adversely affecting such offering,
then the relative rights to participate in such offering of the Holders
of Registrable Stock, the Holders of other Securities having the right to
include such Securities in such registration, and the Company shall be in the
following order of priority:
First: The Person or Persons (including the Company in the case of
an offering initiated by the Company) requesting such registration shall
be entitled to participate in accordance with the relative priorities, if
any, as shall exist among them; and then
Second: The Holders of Registrable Stock shall be entitled to
participate pro rata among themselves in accordance with the number of
shares of Common which each such Holder shall have requested be
registered (for the purposes of this clause, Securities convertible into
or exchangeable or exercisable for Common to be treated as if they were
so converted or exchanged or exercised immediately prior to the filing of
the Registration Statement covering such registration); and then
Third: If such registration shall have been requested by a Person
or Persons other than the Company, the Company shall be entitled to
include Securities in such registration; and then
Fourth: All other Holders of other Securities having the right to
include such Securities in such registration shall be entitled to
participate with the relative priorities, if any, as shall exist among
them;
and no Securities (issued or unissued) other than those registered and
included in the underwritten offering shall be offered for sale or other
disposition by the Company or any Holder of Registrable Stock in a transaction
which would require registration under the Securities Act until the expiration
of 90 days after the effective date of the Registration Statement in which
Registrable Stock was included pursuant to Section 3 hereof, or such earlier
time consented to by the managing underwriters; provided, however, that this
Section 8(B) is
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subject to the rights described in Schedule 4.26 to the Purchase Agreement, but
only upon the terms and to the extent set forth in such Schedule.
9. Assignability of Registration Rights. The registration rights set
forth in this Agreement shall accrue to each subsequent Holder of Registrable
Stock who consents in writing to be bound by the terms and conditions of this
Agreement.
10. Grant of Subsequent Registration Rights. The Company shall not grant
registration rights to subsequent investors in the Company unless such rights
are subordinate to the rights of the Holders of Registrable Stock or the grant
of such rights is consented to by the Holders of not less than a majority of the
then outstanding Registrable Stock. Notwithstanding the foregoing, so long as
any shares of Registrable Stock exist, the Company shall not grant to any Holder
of its Securities other than Registrable Stock the right to include such
Securities in any Registration Statement filed pursuant to Section 2 hereof
without the consent of the Holders of not less than a majority of the then
outstanding Registrable Stock.
11. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
12. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
13. Notices. All communications provided for hereunder shall be in
writing and delivered by hand or by first-class or certified mail, postage
prepaid, to the following addresses, or such other addresses as shall be given
by notice delivered hereunder, and shall be deemed to have been received on the
day of actual receipt:
If to any Holders of Registrable Stock, addressed to such Holders at their
addresses as shown on the books of the Company or its transfer agent;
If to the Company, to:
Caraco Pharmaceutical Laboratories, Ltd.
1150 Elijah McCoy Drive
Detroit, Michigan 48202
Attention: President
or, any case, to such other persons or at such other addresses as shall be
furnished by any such party by like notice to the other parties.
-11-
<PAGE> 12
14. Termination. All rights under this Agreement shall terminate as to
any Holder at such time as such Holder is free to sell all shares of Registrable
Stock and other Common Stock held by such Holder pursuant to Rule 144(k) under
the Securities Act or a comparable exemption from registration that enables the
Holder to sell all shares of Registrable Stock and other Common Stock held by
such Holder without registration under the Securities Act and without
restriction as to the manner of sale or otherwise. This Agreement shall
terminate as to all Holders at such time as no shares of Registrable Stock
exist.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same document.
16. Entire Agreement. This Agreement constitutes the entire agreement by
and among the parties hereto with respect to the subject matter hereof.
17. Amendments and Governing Law. This Agreement may be amended, modified
or supplemented only by a written instrument executed by the Company and Holders
of not less than a majority of the then existing shares of Registrable Stock.
Any term, covenant, agreement or condition in this Agreement may be waived
(either generally or in particular instances and either retroactively or
prospectively) by written instruments signed by the Company and Holders of not
less than a majority of the existing shares of Registrable Stock. Any such
waiver shall be limited to its express terms and shall not be termed a waiver of
any other term, covenant, agreement or condition. This Agreement shall be
governed by and construed in accordance with the laws of the State of Michigan
applicable to contracts made and to be performed in that state.
-12-
<PAGE> 13
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first written above.
ATTEST: CARACO PHARMACEUTICAL LABORATORIES, LTD.
By:/s/William R. Hurd
-------------------------------------
Secretary Its: President
---------------------------------
ATTEST: SUN PHARMACEUTICAL INDUSTRIES, LTD.
By:/s/Sudhir Valia
-------------------------------------
Secretary Its: Full Time Director
---------------------------------
-13-
<PAGE> 1
EXHIBIT 10.63
STOCK PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of JULY 28, 1997, between Sun
Pharmaceutical Industries Limited, an Indian company ("Pledgor") and Caraco
Pharmaceutical Laboratories, Ltd., a Michigan corporation (the "Company").
The Company and Pledgor are parties to that certain Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement") pursuant to
which Pledgor has purchased and now holds 5,300,000 shares of the Company's
Common Stock. Pursuant to the Stock Purchase Agreement, Pledgor has agreed to
pay for 3,886,667 of the shares (the "Pledged Shares") by paying cash or
establishing irrevocable letters of credit (the "Payments") on or before certain
dates as provided in Section 2.2.2 (the "First Payment"), 2.2.3 (the "Second
Payment"), and 2.2.4 of the Stock Purchase Agreement (the "Third Payment"). The
Company has agreed to issue the Pledged Shares in three certificates. With
respect to the Payment referenced in Section 2.2.2, the Company will issue a
certificate for 1,413,333 Shares ("Certificate No. 1"). With respect to the
Payment referenced in Section 2.2.3, the Company will issue a certificate for
1,413,333 Shares ("Certificate No. 2"). With respect to the Payment referenced
in Section 2.2.4, the Company will issue a certificate for 1,060,001 Shares
("Certificate No. 3").
In consideration of the agreement of the Company to issue the Pledged
Shares to Pledgor, Pledgor has agreed to pledge the Pledged Shares as security
for Pledgor's promises to make the Payments. This Pledge Agreement provides the
terms and conditions upon which the promises of Pledgor to make the Payments
will be secured by such pledge.
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor and the Company hereby agree as follows:
1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the
Company a security interest in, the Pledged Shares held by such Pledgor, as
security for the prompt payment of the Payments. The agreements of the Pledgor
pursuant to this Pledge Agreement shall constitute a guaranty of payment and not
a guaranty of collection.
2. DELIVERY OF PLEDGED SHARES. Contemporaneously with the execution and
delivery of this Pledge Agreement, Pledgor is delivering to the Company
Certificate No. 1, Certificate No. 2 and Certificate No. 3, each together with a
stock power, duly executed in blank, in form acceptable to the Company and such
Pledgor.
-1-
<PAGE> 2
3. VOTING RIGHTS. Notwithstanding anything to the contrary contained
herein, during the term of this Pledge Agreement, except upon an Event of
Default, Pledgor shall be entitled to all voting rights with respect to the
Pledged Shares held by such Pledgor.
4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement
is in effect, Pledgor becomes entitled to receive or receives any securities in
addition to, in substitution of, or in exchange for, any of the Pledged Shares
(whether as a distribution in connection with any recapitalization,
reorganization or reclassification, a stock dividend or otherwise), such Pledgor
shall accept such securities on behalf of and for the benefit of the Company as
additional security and shall promptly deliver such securities to the Company
together with duly executed forms of assignment, and such securities shall be
deemed to be proportionately part of the Pledged Shares to which they relate.
5. DEFAULT. If Pledgor does not timely make the Payments as per the
schedule in the Stock Purchase Agreement, this will constitute an Event of
Default and the Company may exercise any and all of the rights and remedies to a
secured party upon default under the Uniform Commercial Code or otherwise
available to the Company under applicable law (the "Rights and Remedies") and/or
the Company may rescind and cancel all of the Pledged Shares without notice to
Pledgor. If however, Sun can not make any timely payment due to reasons beyond
its control, such as natural calamities, political uncertainties, war, Reserve
Bank of Indian's balance of payment situation or other similar reasons or force
majeure, for a period of six months from the due date of a payment, the Company
will not exercise any of its rights or remedies for this period of six months.
Payment within these six months will be treated as a timely payment.
6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including
reasonable attorneys' fees, incurred by the Company in exercising any right,
power or remedy conferred by this Pledge Agreement or in the enforcement thereof
shall become the obligation of Pledgor.
7. PAYMENTS AND RELEASE OF PLEDGED SHARES. Upon timely payment of the
First Payment, the Second Payment and the Third Payment, the Company shall
surrender to Pledgor, Certificate No. 1, Certificate No. 2 and Certificate No.
3, respectively, together with all respectively related forms of assignment.
8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to
time upon the written request of the Company, Pledgor will execute and deliver
such further documents and do such further acts and things as the Company may
reasonably request in order to effect the purposes of this Pledge Agreement.
-2-
<PAGE> 3
9. SEVERABILITY. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10. WAIVERS AND AMENDMENTS; CUMULATIVE REMEDIES. None of the terms or
provisions of this Pledge Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by the parties hereto. Without
limiting the foregoing, the Company shall not by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder and
no waiver shall be valid unless in writing, signed by the parties hereto, and
then only to the extent therein set forth. A waiver by the Company of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Company would otherwise have on any future occasion.
No failure to exercise nor any delay in exercising on the part of the Company,
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided are cumulative and may be exercised singly
or concurrently, and are not exclusive of any rights or remedies provided by
law.
11. APPLICABLE LAW. The Pledge Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws, and not the
principles of conflicts of laws, of the State of Michigan.
12. SUCCESSOR AND ASSIGNS. All covenants and agreements set forth in this
Pledge Agreement by or on behalf of the Pledgor or the company will bind and
inure to the benefit of each of their respective successors and assigns, whether
so expressed or note, except that neither this Pledge Agreement or any of the
rights, interests or obligations hereunder may be assigned by Pledgor without
the Company's prior written consent.
13. HEADINGS. The headings used in this Pledge Agreement are for the
purpose of reference only and will not affect the meaning or interpretation of
any provision of this Pledge Agreement.
-3-
<PAGE> 4
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
SUN PHARMACEUTICAL INDUSTRIES LIMITED,
an Indian company
By:/s/Dilip Shanghvi
-----------------------------------
Dilip Shanghvi
Its: Managing Partner
CARACO PHARMACEUTIC LABORATORIES, LTD.
By:/s/William R. Hurd
-----------------------------------
William R. Hurd
Its: President
-4-
<PAGE> 1
EXHIBIT 10.64
March 27, 1997
Mr. David A. Hagelstein
1411 North Woodward Avenue
Suite 313
Birmingham, Michigan 48009
Mr. Jay F. Joliat
Joliat & Company, Inc.
1411 North Woodward
Suite 300
Birmingham, Michigan 48009
Sun Pharmaceutical Industries Limited
Synergy House, Subhanpura
Gorwa Road, Baroda, 390-007 India
Attn: Dilip Shanghvi
RE: CARACO PHARMACEUTICAL LABORATORIES, LTD. (THE "COMPANY")
Dear Messrs. Hagelstein, Joliat and Shanghvi:
This letter, when countersigned by Hagelstein, Joliat and Sun Pharmaceutical
Industries Limited ("Sun"), will constitute a binding agreement between the
Company, Hagelstein, Joliat and Sun. Each of the parties is aware of the
Company's financial circumstances, the necessity for the Company to raise
additional financing for operating capital and Sun's proposal to make a capital
contribution of $7.5 million for 5.3 million shares of the Common Stock of the
Company (the "Capital Contribution") pursuant to a stock purchase agreement (the
"Stock Purchase Agreement"). Each of the parties is also aware that Sun has
included as a condition to consummation of the Stock Purchase Agreement that
Messrs. Hagelstein and Joliat each agree to "contribute" $500,000 each (as
described below) to the Company.
Accordingly, Sun hereby agrees to make the Capital Contribution pursuant to the
terms and conditions of the Stock Purchase Agreement in reliance upon the
promises of Messrs. Hagelstein and Joliat hereunder. In addition, in order to
accommodate Sun and assist the Company in raising needed financing, and
acknowledging (i) the personal benefit to Hagelstein and Joliat in having Sun
provide the Company with the Capital Contribution, and (ii) Sun's reliance on
Hagelstein and Joliat each satisfying all of the terms and conditions of this
agreement, Hagelstein
-1-
<PAGE> 2
and Joliat each agree to contribute $500,000 to the Company (in the manner
described below) within the three (3) months following Sun's contribution of
$4.0 million (U.S.) of the $7.5 million Capital Contribution. If, however, any
part of Sun's $4.0 million contribution is in the form of an irrevocable letter
of credit, the $4.0 million contribution will not be deemed to have been
contributed for the purpose of this letter agreement, and Hagelstein's and
Joliat's obligation to provide $500,000 each to Caraco will not commence, until
the entire amount of the letter of credit(s) has been drawn down by Caraco and
Caraco has actually received a total of $4.0 million (U.S.) in cash from Sun's
$4.0 million contribution.
The Company will not be obligated to Hagelstein or Joliat in connection with
their respective contributions and, accordingly, neither Hagelstein nor Joliat
will receive any securities of or from the Company (including notes or stock)
for such contribution to the Company. Hagelstein's and Joliat's respective
contributions may be in the form of any combination of one or more of the
following: (i) cash and/or (ii) shares of the Company's Common Stock ("Shares")
valued at the higher of (a) the average of the bid and ask price or the closing
price of the securities on the applicable national securities exchange, Nasdaq
Small Cap Market, Nasdaq National Market, OTC Bulletin Board or comparable
exchange during the five (5) trading days prior to the contribution or (b) at
some other mutually agreed upon value. Notwithstanding the above, in the event
that Hagelstein and/or Joliat elect to contribute Shares, neither Hagelstein nor
Joliat will be obligated to contribute more than a maximum of 250,000 Shares
each.
Very truly yours,
CARACO PHARMACEUTICAL LABORATORIES, LTD.,
a Michigan corporation
/s/William R. Hurd
By: William R. Hurd
Its: President
-2-
<PAGE> 3
The terms and provisions of this
letter agreement, and each of them,
are hereby accepted and approved:
/s/Jay F. Joliat Dated: March 27, 1997
- -------------------------------------
Jay F. Joliat, individually and
as Trustee of the Jay F. Joliat
Qualified Terminable Interest
Marital Trust u/a/d 4/8/82
/s/David A. Hagelstein Dated: March 27, 1997
- -------------------------------------
David A. Hagelstein, individually and
as Trustee of the David Hagelstein
Trust u/a/d 10/27/93
Sun Pharmaceutical Industries Limited
By: /s/Dilip Shanghvi Dated: April 1, 1997
----------------------------------
Dilip Shanghvi
Its: Managing Partner
-3-
<PAGE> 1
EXHIBIT 10.65
July 27, 1997
Mr. David A. Hagelstin
1411 North Woodward Avenue
Suite 313
Birmingham, Michigan 48009
Mr. Jay F. Joliat
Joliat & Company, Inc.
1411 North Woodward
Suite 300
Birmingham, Michigan 48009
Sun Pharmaceutical Industries Limited
Synergy House, Subhanpura
Gorwa Road, Baroda, 390-007 India
Attn: Dilip Shanghvi
RE: CARACO PHARMACEUTICAL LABORATORIES, LTD. (THE "COMPANY")
Dear Messrs. Hagelstein, Joliat and Shanghvi:
This document when countersigned by Hagelstein, Joliat, and Sun Pharmaceutical
Industries Ltd. ("Sun") will constitute a binding addendum to the Caraco
Pharmaceutical Laboratories, Ltd. (the "Company") contribution agreement letter
dated March 27, 1997 between Messrs. Hagelstein, Joliat and Sun.
As required under the agreement Mr. Joliat contributed $150,000 which under this
addendum is to be construed as the equivalent of 150,000 common shares, as all
parties to the agreement concur that Mr. Joliat could have purchased 150,000
common shares in the open market for $150,000 or less at the time of the cash
contribution. The remaining balance due from Mr. Joliat under the contribution
agreement is $200,000 or 100,000 common shars and is to be made at Mr. Joliat's
election as outlined in the lst paragraph of the contribution agreement.
Very truly yours,
CARACO PHARMACEUTICAL LABORATORIES, LTD.,
a Michigan corporation
/s/William R. Hurd
By: William R. Hurd
Its: President
-1-
<PAGE> 2
The terms and provisions of this
letter agreement, and each of them,
are hereby accepted and approved:
/s/Jay F. Joliat Dated: July 27, 1997
- -------------------------------------
Jay F. Joliat, individually and
as Trustee of the Jay F. Joliat
Qualified Terminable Interest
Marital Trust u/a/d 4/8/82
/s/David A. Hagelstein Dated: July 27, 1997
- -------------------------------------
David A. Hagelstein, individually and
as Trustee of the David Hagelstein
Trust u/a/d 10/27/93
Sun Pharmaceutical Industries Limited
By: /s/Dilip Shanghvi Dated: July 27, 1997
----------------------------------
Dilip Shanghvi
Its: Managing Partner
-2-
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